RETURN TO GOLD IN 1925 219
employment will increase, exports will fall off and imports will
increase.’
It is scarcely open to dispute that in advancing for the sake
of his argument the conditions which he does not believe
obtained in Britain, Professor Gregory has outlined with almost
uncanny precision the exact situation which did exist in the
Commonwealth. Nor can it be denied that the phenomena
which he associates with this situation have been fully evident
in Australia since 1925. No country in the world at the time
covered by the events under discussion possessed such a rigid
system of wage fixation, nor, on both the side of capital and
the side of labour, a more decided quasi-monopolistic organiza-
tion of industry. It is not, therefore, to be wondered at that
real wages rose in the industries sheltered by the tariff, that
unemployment has been a pressing problem since the return to
gold, that productivity and exports-have fallen away, and that
imports have tended to increase.
The tests, therefore, which will provide strong presumptive
evidence, if it is to be found at all, of the effects of stabilizing
the pound at parity with the dollar will have reference to the
relative cost of living, to the level of wages, to the volume of
unemployment, and to the volume of foreign trade for the
period immediately following the restoration of the gold value
of the currency.
Let us take first the ‘cost of living’ test. If the Australian
pound had been previously over-valued in terms of the dollar
we should expect to find an increase in the cost of living in
Australia after the return to gold. Table LIT indicates that,
whereas the American cost of living rose after the return and
then fell within eighteen months to about its original level, the
British index number rose in sympathy and then fell sharply.
On the contrary, the Australian cost-of-living index rose and
continued to rise over the whole period, thus strengthening the
suspicion that the favourable situation in April 1925 was due
to factors which afterwards ceased to function. Overseas loans
and payments on account of Bawra. it will be noted, ceased
abruptly in 1925.
From thé records of unemployment little that is conclusive
! Gregory, The First Year of the Gold Standard, p. 17, The italics are mine.