164 BANKING AND BORROWING POLICIES IN 
this as for more normal periods, that borrowing was again a 
potent factor in the national economy, and that, in this respect 
at least, the period was normal in its abnormality. 
Financially, the dominant characteristic of the war period for 
Australia as for most other countries was the great currency 
inflation that took place. More or less deliberately planned as 
a war finance measure, this inflation brought in its train a whole 
series of economic effects of the first importance ; and of these 
the chief was undoubtedly the great and rapid rise in the price- 
level. But that is not to admit that the sole cause of price 
movements during the period was currency inflation. Other 
factors of relatively smaller importance, but far from negligible 
in their total effect, must be taken into account. The interrup- 
tion or abrupt stoppage in the supply of almost every commodity 
from overseas in the early phases, and the heavy borrowings 
as the war proceeded, to mention only two other causes, were 
extremely important in their effect on prices. 
There is not any intention here of belittling the overwhelming 
importance of the war-time inflation upon prices. This has been 
the subject of a masterly analysis by Professor Copland®; and 
further examination of that aspect does not fall within the 
scope of this essay. Price movements, moreover, will be con- 
sidered from another angle in a later chapter when the terms of 
trade come under discussion. We have seen already that a 
general upswing in prices had been in progress since 1900. 
Wholesale prices rose, during the years between 1901 and 1914, 
by 18 per cent., while the cost of living rose by 26 per cent., 
mainly because of the great increase in house-rents. The 
average annual increase was very slight in the last decade before 
the war. Between 1914 and 1918 wholesale prices rose by 115 
per cent., retail prices by 56 per cent., and the cost of living by 
70 per cent. ; and although these increases did not approach the 
extent of similar movements in other countries, they ‘must be 
considered as quite abnormal in a country like Australia with 
abundant supplies of the necessaries of life’.2 The relation 
1 See in this connexion (i) Article, ‘Currency, Inflation, and Price Movements in 
Australia’, Beonomic Journal, Dec. 1920; (ii) a more extended treatment in the 
Joseph Fisher Lecture, Currency and Prices in Australia, University of Adelaide, 
1921; and (iii) Paper, The Trade Depression in Australia in Relation to Economic 
Thought, Proceedings of Section ‘G’ of the A.A.A.S., Auckland, 1923. 
2 Article cited above, Economic Journal. Dee. 1920.