Full text: Borrowing and business in Australia

IN RELATION TO PUBLIC BORROWING 177 
which took place during the war years as well as the tension 
which developed after the crisis is indicated in the following 
table: 
June 30 
of year 
914 . 
[919 . 2 
1920 . . 
1921 . 
19029 
Deposits in Australian Banks! 
TABLE XL 
Percentage 
reserves to 
current 
deposits. 
Percentage 
reserves to 
total 
deposits. 
Deposits. 
Join, bullion, 
and notes. 
£m. 
£m. 
159-209 
231-270 
247-647 
248-231 
240.200) 
41-447 58 
57-894 19 
56-940 | 42 
56-120 44 
55-200 45 
26 
25 
23 
23 
9% 
The lower margin of safety as expressed by the ratio between 
reserves and deposits before and after the war is here clearly 
expressed. Even after the very strenuous efforts made by the 
banks to strengthen their position by means of a drastic re- 
duction of credit, the percentage of reserves to total deposits 
was no higher than 19-5 in September 1921, as compared with 
about 25 per cent., which was regarded as normal in the pre-war 
period. 
It will now be of interest to gather together the several factors 
combining to produce this recession phase in Australian business. 
Copland indicates the following as the chief causes of the crisis, 
and they form an interesting comparison with factors which 
were operative in producing the boom.? They are as follows: 
(1) The deflation in England and America, and the heavy fall 
in domestic prices. 
(2) The over-issue of credit beyond the limits allowed by 
reserves. 
(3) The stringency of the money market, and the action of 
the banks in respects of credits. 
(4) The heavy fall in prices of agricultural products and 
meat, and later on of dairy products, i.e. a general fall in 
the export price-level. 
1 Commonwealth Finance Bulletin, No. 13. 
? Copland, A.A.A.S. paper cited above. 
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