MOVEMENTS AND TRADE 119 
countries at once causes a monetary disturbance of the balance 
of payments. The corrective, quite obviously, is a corresponding 
regulation of credit; although a drastic reduction in Britain 
tends to have on the Australian system a more than commen- 
surate effect. The wider the swing from expansion to con- 
traction in Britain, the more serious is the inevitable dislocation 
of credit in Australia. For an adequate explanation of the 
majority ‘of Australian business crises we need scarcely look 
further than to the fluctuations in available bank credit which 
are consequent upon sudden changes in credit conditions in 
London. 
It 4s, however, more strictly to what Hawtrey calls with 
doubtful accuracy the ‘non-monetary’ causes of such dis- 
turbances that our examination should be directed, since the 
phenomena are not nearly so definite nor so clearly expressed 
in terms of the trade balance. Non-monetary disturbances 
may have their origins in a change in the demand for, or the 
supply of, foreign commodities in Australia. More important 
still, they may arise in borrowing; or, to be more explicit, in 
changes in the rafe at which British capital is injected into the 
Australian economic system. 
Consider for a moment the position created when exports of 
primary products from Australia are stimulated either through 
increased production due to good seasons, or through an increase 
in the overseas demand for these commodities. The farmers and 
export merchants will now become entitled to increased sums 
of foreign currency which, by the operation of bills, will bank 
up in London under normal conditions, and there await transfer 
to Australia as opportunity offers. But the preliminary stages 
leading to this result are the immediate payment by the banks 
in Australia to the merchants by discounting their bills, and the 
settlement by merchants with the producers. The seasonal 
situation which thus develops is that in which the Australian 
banks in London hold large amounts of Australian bills which, 
other things being equal, would tend to upset the equilibrium 
of the exchange. But nothing of the sort normally happens. 
For, meanwhile, the producer will be expending his income 
partly on investment, and partly on consumption goods which 
may be either foreign-trade goods such as American motor-cars, 
home-trade goods such as boots, or either foreign- or home-