CHAPTER XVI 
THE BALANCE OF INDEBTEDNESS, 1918-28 
‘The investment of capital abroad, the travel of tourists, and all the other factors 
outside of the balance of trade itself are the comparatively independent variables, 
bhe balance of trade in goods is the compensatory variable in the balance sheet of 
botal indebtedness.’ —A. C. Warraxer, ‘The Ricardian Theory of Gold Move- 
ments’, Journal of Economics, Feb. 1904, 
The adjustment of the balance of trade to a newly introduced or increased disturb. 
ng factor is brought about through the influence of divergent price-levels on the 
quantitative ratio of exports to imports.’ —VINER, Canada’s Balance of International 
Indebtedness, 1. 254. 
As compared with the pre-war period, Australian overseas trade 
for the years between 1918 and 1928 exhibits some striking 
changes. Reference has already been made to the effects of 
war-time conditions upon the economic relations of Australia 
and Great Britain, and the weakening of former trading con- 
nexions must be regarded as not the least of these. The loss by 
Britain and the gain by the United States of financial power, 
the enlargement of advantages acquired by other nations in 
their trade with Australia during Britain's preoccupation in 
waging the war, and the search by Australia for markets for 
her increasing output of primary products, were all to some 
extent responsible for the more pronounced multi-angular trade 
relations of the post-war period. The Anglo-Australian trade 
organization which had such pronounced effects in shaping the 
financial system of Australia before 1914 was now passing; and 
the effects are to be seen in the curious changes in the trade 
balance, in the even more unusual exchange situations which 
developed, and in the uncertainties of business which are still 
a puzzle to both bankers and traders. 
The history of the exchanges between Great Britain and 
Australia in the post-war period has still to be written; and the 
extraordinary situations which developed, particularly in 1921 
and 1924, indicate the operation of factors that have not yet 
been adequately examined. There seems little room for doubt 
that the alternate plenty and dearth of funds in London await- 
ing transfer to Australia was the immediate explanation; but 
evidence concerning the causes of these fluctuations, except in 
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