184 ANALYSIS OF THE TERMS OF 
to what Taussig calls ‘dislocated exchanges’, we should not, 
indeed could not, expect to observe that correlation between 
gold and capital movements previously discerned. But, if it is 
found that, while net barter terms of trade vary little as between 
the beginning and the end of the period, gross terms rise con- 
siderably at first but finish with a sharp decline, we may 
confidently regard these changes as the customary manifesta- 
tions of the borrowing cycle, even though they are masked and 
overlain by the effects of the serious inflation which occurred, 
and by the price movements of which inflation was the chief 
nase. 
Notwithstanding the revolutionary changes in the mode of 
marketing Australian products, the dislocation of carrying and 
insurance services, and the abolition of the gold standard, the 
mechanism of trade as between Great Britain and Australia was 
not greatly altered.! More especially the financial nexus, that 
reliance by the Commonwealth on the financial support afforded 
by Great Britain, was strengthened. The dependence upon the 
Mother Country in the matter of capital loans was increased 
rather than diminished. These, then, are the chief grounds for 
including the Australian experiences between 1914 and 1928 in 
this survey. Indeed they form an integral part of that picture 
which is being completed in the post-war period. 
In 1915 and the following years there developed a great 
demand for Australian products. The wool, foodstuffs, minerals, 
and many other items which the Commonwealth was able to 
contribute towards the civil and military prosecution of the 
war assumed an enhanced importance. Year by year, too, 
exports mounted under the stimulus of higher prices and the 
government encouragement of increased production. Imports 
also increased, but at a slower rate owing to difficulties in 
getting orders fulfilled in Britain. For the same reason remark- 
able changes took place in the direction of the import trade, 
from which Japan and the United States mainly benefited. An 
excess of exports developed, averaging £25 millions a year in the 
1916-19 period compared with an annual excess of £13 millions 
! This comparative stability was due to the long-established relations between 
British and Australian banking and the traditional view that the two currency 
units were identical. Even without the common basis of gold, and in spite of the 
abnormal conditions imposed by war finance, the expansion and contraction of 
credit proceeded as in pre-war days.’ —Copland, Foreign Ranking Systems, p. 84.