Full text: Borrowing and business in Australia

of its influence upon the business cycle, and because of its impli- 
cations for national welfare as a result of sudden interruptions 
in the rhythm of trade. For the purpose of this discussion, some 
quantitative measure of the relative advantage or disadvantage 
of trade is indispensable; and the gross barter terms offer a 
convenient criterion by which the rise and fall of trade advantage 
can be judged. Where payment for services does not enter into 
the problem at all, it is clear that there must be some advantage 
for both parties in the exchange or there would be no trade at 
all. It is equally true that, where services have been rendered, 
payment of goods or services in return must be made; and, 
where the liability for repayment of borrowed capital or for 
payment of interest has been assumed on one side, some portion 
of the trade becomes a continuous and compulsory acknow- 
ledgement of that liability. It is in this variation between the 
proportions of the optional and compulsory parts of a country’s 
trade that the greatest fluctuation in the relative advantage or 
disadvantage of trade becomes possible. Or, to be more precise 
in our Australian application, as a result of the interaction of 
so many factors there is possible a very wide range between 
more favourable and less favourable terms in overseas trade. 
It is, therefore, as the non-merchandise factors enter into 
overseas trade that the necessity for distinguishing between 
gross and net barter terms arises. That part of overseas trade 
which is merely an exchange of exports for an equivalent value 
in imports has then to be distinguished from the excess of 
exports over imports which represents payments for services 
or ‘the balance of non-merchandise transactions’, to use Taus- 
sig’s phrase. A country such as Australia which has borrowed 
largely has net payments to make on the invisible account, and 
must maintain over long periods an excess of exports over 
But the money value of imports and exports does not serve 
as an effective measure of the advantage of trade from year to 
year, since the volume of goods exchanged is not thus brought 
into the reckoning. It is for the comparison of the whole of 
a country’s physical imports with the whole of its physical 
exports that the gross barter terms become peculiarly valuable. 
Regarding international trade from this angle the only meaning 
which can be given to such phrases as ‘favourable balance of 

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