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