TO CAPITAL REQUIREMENTS 243 
necessity for making increasing external payments ; and the only 
response possible would involve an increase in exports, a de- 
crease in imports, or both. To the extent that Australia finds 
it economically impracticable to secure additional supplies of 
capital on the same scale as in the last half-century, she would 
be compelled to widen the margin between production and con- 
sumption. All the phenomena characteristic of the short-period 
credit restriction occurring at the end of the borrowing cycle 
would become the normal condition of a less marked but more 
protracted period of depression. 
Within certain limits an increase in exports and a decrease 
in imports might be easily achieved ; and the impact on living 
standards, as Dyason indicates, might be so slight as to be 
almost negligible. Beyond these limits, however, a depression 
of the standard of living must be anticipated ; and, in the pro- 
cess, a certain amount of economic friction would characterize 
the change. To cover the increased payments abroad—in- 
creased, in effect, because there would be no incoming capital 
as an ofiset—both State and Federal governments would be 
under the necessity of increasing taxation; and the effect of this 
upon the community as a whole would be to reduce consumption 
by a like amount. The decline in demand which would follow 
diminished purchasing power would be felt in the markets for 
both home- and foreign-trade commodities. The effect on the 
market for foreign-trade goods would be to diminish imports: 
that on domestic markets would be to release an additional 
portion of production for export. To that extent the regulation 
of the international equilibrium would be automatic and 
sufficient. 
It will be seen, however, that the effect upon the balance of 
trade is merely an indirect one. A situation is conceivable, 
indeed has already developed, when this indirect stimulation of 
exports would not be adequate to bridge the discrepancy 
between the two sides of the international account. Means would 
then have to be devised, partly by means of still higher taxation, 
partly by industrial policy, to enlarge the disposable income, 
i.e. to divert such a proportion of the productive power of the 
community from the production of home-trade commodities to 
that of foreign-trade commodities as would cancel the difference 
in the balance of payments. Such a diversion could only be