CHARACTERISTIC FEATURES OF 
pay, or sudden enough to endanger our solvency over short 
periods, was the rate at which capital was introduced. 
This long-period obligation—the difference between the debits 
and credits in our national account-current with other countries 
—is the equilibrating factor in the Australian balance of inter- 
national indebtedness; and, over the long period a continued 
debit difference affects both our purchasing power and our 
national credit. But there are ‘settlement days’, as it were, 
when the balance of immediate obligations to pay—the ‘balance 
of payments’—becomes of urgent importance. This debit 
difference of payments represents the immediate liability faced 
by the country in respect of services rendered by other countries ; 
and it is usually not until such times as the difference is par- 
ticularly to our disadvantage, that is to say when the financial 
shoe begins really to pinch, that the community can be induced 
to take an interest in national economics. 
Now one great factor in the Australian balance of inter- 
national indebtedness and so, ultimately, in the balance of 
payments is the amount of capital invested in Australia by 
Great Britain, or, to be more precise, the amount of interest 
due and capital repayable at any moment. Furthermore, in 
the transition between youth and maturity as a borrower, a 
country moves from a position in which the interest is much 
less than the new debt to a position where the annual interest 
charge first equals and then exceeds the amount of new loan 
raised in each year. The net result may be stated very simply. 
We can distinguish, (i) a constant annual interest charge which 
has to be met from a fluctuating national income, and (ii) a 
variable annual residue of national income which is left to the 
community for domestic expenses after interest and repayment 
charges have been met, and which has been called the ‘living 
fund’ by Dr. F. C. Benham. 
It will be clear that fluctuations in productivity, and so in 
national income, will operate to vary, not the constant liability, 
but the variable residue; and that any factor, from capital 
indebtedness to seasonal shortages in production, which tends 
to diminish the residue available for ‘running expenses’ will 
affect, in a more than proportionate degree, the prosperity of 
the community through its effects upon the distribution of 
income and upon the standard of living. And, since these factors 
B