THE BALANCE OF INDEBTEDNESS, 1918-28 199 
The year 1908 has been chosen as a base year on account of 
the normal character of its trade, and also because it was 
representative of the era before the import of motor vehicles 
began to figure largely in overseas trade. In that year the 
capital imports were £13 millions out of a total of £50 millions, 
or 26 per cent. Further, borrowings for 1907 and 1908 amounted 
to about £2-5 millions a year, while the average for the decade 
was about £6 millions. It will be seen, therefore, that the heavy 
subsequent borrowing did not increase the import of capital 
goods out of proportion to that of consumption goods, measured 
by the statistics of 1908. But this balance between the two is 
maintained by including with capital goods the import of motor 
vehicles, If these were removed from one class to the other, a 
procedure for which there would be doubtful justification, the 
respective percentage increase for each group would become 
164 and 226. In any case the evidence fails to show an increase 
in capital as compared with consumption goods in any way 
commensurate with the borrowings for the period. Nor does the 
analysis of imports year by year, correlated with new loans, 
make the case for capital goods any stronger. 
The second consideration bears upon the changes in the 
direction of trade to which reference has already been made; 
and has particular application to the relation between British 
capital loans and British exports to Australia. The belief that 
loans from a country necessarily imply a corresponding increase 
in the exports from that country has recently been called into 
question by Mr. J. M. Keynes; and the facts drawn from the 
history of Australian trade by no means support the traditional 
view. While it is certain that in the early days of the develop- 
ment of the country, capital loans entered largely as capital 
goods in the form of railway and constructional material, in the 
later period no such definite correlation can be traced. Neither 
an increased British proportion of imports into Australia nor 
a predominance of capital goods among the incoming commo- 
dities can be discerned. What can be detected is rather a 
tendency for borrowing to increase the predominance of con- 
sumption goods in the imports, and to facilitate the purchase of 
both capital and consumption goods from other than British 
countries. 
I Commonwealth Year Book, No. 21, Chapter VI, Section 14.