Full text: Borrowing and business in Australia

effected by the deliberate adoption of policies aimed at stimula- 
tion of primary industries, by public retrenchment and private 
sconomy, and by such a reorganization of national industry as 
would intensify the effort to discover and exploit new resources. 
If secondary industry remained static, such a change would 
entail a reversal of the movement of population towards the 
capital ports such as took place after the 1893 crisis in Victoria. 
This rearrangement of the factors in national production would 
necessarily accentuate unemployment during the adjustment, 
and would entail some sacrifice upon almost every section of 
urban population—the sections, that is, which stand to gain 
most by the expansionist tendencies associated with periods of 
heavy borrowing. The process, when complete, would realine 
national production in accordance with Australia’s existing 
comparative advantage in overseas trade; would, by the con- 
sequent changes in relative price-levels, intensify any advantage 
in trade that formerly existed ; and would tend to increase both 
the volume and the value of export commodities. 
This is not to assert that the existing secondary industries 
would necessarily disappear or be left relatively weaker. Those 
which are based more upon natural economic foundations than 
upon tariff buttresses would, at the most, be in no worse posi- 
tion ; but it is not to be supposed that the uneconomic diversion 
of large blocks of productive power to inefficient industries could 
be maintained in the face of the circumstances that we have 
assumed are likely to arise. It may be that the increased 
efficiency induced by hard necessity, and the relative fall in 
labour costs, would enable most of the existing manufacturing 
plants to continue. The elimination of the economically in- 
efficient would, at the worst, merely mean the postponement 
of that ideal self-sufficiency in industry to which no modern 
sommunity has yet attained. 
The transition period now being contemplated would bring 
its own difficulties connected with the operation of the foreign 
exchange. The probable maladjustment of domestic credit 
owing to tapering capital imports would need careful manage- 
ment of bank credit; and, in the international sphere, the 
oppressive factor of adverse exchanges would call for counter- 
measures. All the conditions of expanding credit and favourable 
exchanges associated with vigorous overseas borrowing would,

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