OVERSEAS TRADE AFTER 1890 97 
in bank deposits and reserves, and this has already been 
noticed for Australia. Consequent upon this there will follow 
a rise in prices which will shift some part of the demand for 
home-trade goods to foreign-trade goods, since the changing 
price-level will first make home-trade goods dearer. A certain 
amount of substitution will also take place, and will tend to 
120 | 
710 
SMPORTS 
“00 
90 
EXPORTS 
0 
J0 
158 1890 1892 1804 “1896 
Fie. VI. PRICE-LEVELS OF IMPORTS AND EXPORTS 
(After Coghlan.) 
reinforce this effect. Increased purchasing power in Australia 
will result in intensifying the demand for goods which enter 
into both home and foreign trade; and on this account also 
imports will increase and exports diminish. The rising cost of 
domestic production would tend to lessen the comparative 
advantage possessed by Australia for the production of com- 
modities for overseas trade, since labour would tend to be less 
effective by being diverted to the constructional works for which 
the capital was borrowed. Some commodities will even dis- 
appear from the export trade altogether, and may even tend 
to be imported. 
3710