INTRODUCTION

IN these days when economic opinion is divided between an
unwavering allegiance to some theory of the business cycle and
a sceptical refusal to acknowledge any cyclical movement in the
fluctuations of prosperity, any attempt to find an adequate
explanation of the instability that has manifested itself from
time to time in Australian economic affairs is bound to meet
with formidable criticism. Under these circumstances it will
tend to avoid argument that would merely cloud the main issue
if it is declared at the outset that the use of the term business
cycle in these pages depends rather upon the welcome convenience
 of a label that can be applied to these fluctuations,
than upon the acceptance by the writer of any particular theory
which professes to explain this instability.
It may, indeed, be objected that this somewhat naive attempt
to disarm criticism is invalid in that the whole trend of the
thesis merely constitutes one more interpretation of the causes
lying behind business cycles in Australia. The objection may
or may not be tenable, since it is contended that the present
argument postulates one efficient cause that is external to
Australian business, rather than the operation of a number of
inter-related factors forming a complex whole within the
economic structure itself. The dominant control of Australian
business has, in fact, usually been sought in conditions that
are external to Australia; and, apart from the meteorological
tactor, the contraction of world credit has most frequently been
regarded as the chief cause of our economic indispositions. A
marked consilience can, indeed, be traced between credit contraction
 in London and commercial crises in Australia, a close
connexion that tempts explanations of the post koe ergo proper
hoc order. For example, the crisis of 1843 followed the British
crisis caused by the multiplication of banks and credit facilities,
that of 1866 was apparently consequent upon the Qverend-Gurney
 trouble in England, while the Baring crisis of 1890 and
the post-war depression of 1921-2 were closely followed by
financial malaise in Australia. What more natural than to find
a causal sequence in these events ?
But it becomes abundantly apparent upon investigation that
these events overseas were not responsible for the sudden