Full text: Borrowing and business in Australia

TrE preceding chapters left my hands towards the end of 1929. 
Since that time a conjunction of evil circumstances—not unknown in 
sarlier days—has afflicted the Australian Commonwealth. Falling 
world prices, unresponsive loan markets, declining production due 
to unfavourable seasons in some states, and adverse exchanges have 
been marked features of the more recent period. The impact upon 
the Australian financial and industrial system has caused such grave 
dislocation as to menace the established standards of living of the 
entire population of the continent. Preoccupation with the economic 
problem has become an obsession which leaves little room for the 
consideration of the many important social and political difficulties 
associated with Australian development. 
The whole problem is essentially one which is conditioned by 
fluctuations in national income, and every analysis made by econo- 
mists and business men emphasizes this aspect. The adversity of 
the moment is, admittedly, due only in part to conditions that have 
their origin in the Commonwealth ; but some interest remains in the 
task which I have attempted of tracing those effects which are merely 
the normal accompaniments of the borrowing cycle. The immediate 
decline in national income is due in the main to three causes: (a) the 
fall in world prices for primary products; (b) the contraction in the 
volume of loans; and (c) the decline in productivity due partly to 
unfavourable seasons, and partly to those more obscure causes 
associated with ‘easy money’ to which reference has been made in 
an earlier chapter. It must be emphasized that no fall in national 
income of a marked character occurred until the early months of 
1930; or, rather, that the downward movements of national income 
before that time were compensated by the volume of capital flowing 
in from overseas. 
The monetary problems arising from the fall in prices of Australian 
export commodities have affected all countries possessing a similar 
economy. The decline in national income from this cause is not due 
to any marked decrease in the volume of national production ; nor 
does the present financial situation have its origin in any fundamental 
unsoundness in business such as the excessive speculation which has 
prevailed in some oversea countries in recent years. An important 
fact calling for attention, however, is the persistently high level of 
Australian wholesale prices in relation to those of Great Britain and 
the United States. Still more significant is the fact that, since 1920, 
the general trend of Australian retail prices has been upward, whilst

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