256 APPENDIX
those of the other two countries mentioned have been downward.
This may be interpreted as the normal movement to be expected
in a country that has resorted to overseas borrowing as freely as
Australia has done during the last decade. It will be anticipated
that the introduction of capital into Australia would be regarded
by me as the chief factor maintaining this relatively higher price
level; but this does not prevent me from conceding considerable
weight to the joint effects of tariff and wage fixation policies.
The compulsory contraction in the volume of overseas loans is due
in great measure to the disturbance of the world money markets by
the events of 1929. Uneasy conditions, especially in Britain following
the Hatry crisis, the steady draining away of British gold occasioned
by French financial policy, the break in the speculative boom in
the United States, and the general failure of the central banks of
the world to ‘keep in step’, occasioned the reluctant response to the
demands for loan issues, a reluctance which finally hardened into
positive denial. These causes tending towards a shortage of world
sredit have intensified Britain's difficulties in the matter of overseas
loans, difficulties that were already troublesome on account of the
demands for domestic issues for the rehabilitation of British indus-
tries. For Australia, accustomed to the annual receipt of from £25
to £30 millions of fresh capital, this meant a second sudden contrac-
tion in national income. Crippled in both feet, productivity and
fresh capital, her financial system hobbled painfully through a period
of grave crisis; and the restoration of equilibrium became the great
obsession of her people. The effect of these world changes has been
such seriously dislocated exchanges that the most adverse rates
within living memory were experienced.
The third circumstance affecting national prosperity concerns the
comparison of earning power, or borrowing capacity, with the felt
burden of overseas indebtedness. This is the economic criterion
already indicated as the final economic test, and a recent computa-
tion made by the Commonwealth Statistician makes possible the
most exact application yet made to the Australian situation. From
a comparison of total output from all industries with the number of
workers engaged, adjusted to the 1911 price level, he reaches the
index of productive efficiency which is here reproduced. In the final
analysis the burden of overseas debt must be sustained by the workers
in all industries. After computing this indebtedness per worker it is
then possible to reach a figure for the ‘felt’ burden by adjusting the
interest figure for each year to the price level for exports by means
of which the interest is payable. The construction of an index for
this felt burden gives an immediate comparison of the rate of pro-
ductivity increase as compared with the rate of increase in the