Full text: Borrowing and business in Australia

‘Whether the wealth to be consumed in the outlay which is the primary cause of 
borrowing be derived from the stores of home or foreign lenders may have some 
immediate influence; but when we bear in mind the close connexion of all the 
countries of the world, and the great mass of private borrowing from foreigners, 
it is evident that the distinction may easily be exaggerated.’—BASTABLE, Public 
Finance, p. 679. 
‘The great additional foreign indebtedness incurred since 1914, much of it resulting 
from economically unproductive military expenditures, from the completion of 
an extravagant programme of railroad and town building, from the construction 
of an unprofitable merchant marine, and from the further extension of manu- 
facturing industries of which few would have any expectation of surviving if their 
tariff subsidy were withdrawn, will intensify the seriousness of the problem which 
will face Canada when the borrowings cease and the difficult burden of repayment 
must be assumed.’ — VINER, Canada’s Balance of International Indebtedness, p. 306. 
THE economic reactions set up within the Australian national 
economy by borrowing have now been examined in some detail. 
In particular, for three separate and independent cycles, similar 
long-period changes in prosperity, operating through rising and 
falling prices in the earlier and later phases, respectively, of 
each cycle have been traced ; and the necessity imposed upon 
the community for assigning an increasing proportion of its 
disposable income to the payment of interest upon the external 
debt has been indicated. The mechanism for adjusting the 
disequilibrium set up in the international balance by heavy 
external borrowings, and the parallelism of gold movements 
and capital importations, have been investigated. Lastly, an 
equation between the volume of capital imported and the total 
difference between the debits and credits in the international 
account over the long period has been established ; and an 
attempt has been made to synchronize credit restriction within 
the Commonwealth with the temporary divergence between the 
moving averages of capital imported and the excess of debits 
over credits in the balance of external indebtedness. It now 
remains to consider the development and persistence of a world 
credit situation which might involve a reversal of the whole 
process ; and to anticipate as nearly as possible the effects which 
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