Australia and the Great DepressionJoin now to read essay Australia and the Great DepressionWhy did Australia lead the world into Depression in the late 1920s and suffer its effects so gravely and for so long?Australia suffered significantly during the Great Depression of the late 1920s. Australia was one of the worst effected countries in the World. This essay will look at why Australia lead the world into Depression in the late 1920s and why it suffered from its effects for so long. A depression is defined as “A period of drastic decline in a national or international economy, characterized by decreasing business activity, falling prices, and unemployment.” 1 During a depression money becomes limited which in turn leads to businesses going bankrupt and causing workers to lose their jobs. This usually leads to a downward spiral that can continue for some time. The Great Depression was one of the most severe depressions in modern times. A depression can be situational, regional or even global. The Great Depression is considered to have begun in 1929 after the stock market crash in Wall Street. 8 The effects of this depression were felt around the entire world. This caused a ripple effect onto the rest of the world due to the large dependence on the American economy. Australia had already been in a bad economic situation with high government loans and large unemployment 9. This essay will look at the causes of the depression in Australia. It will look at why the export based economy of Australia caused Australia to become one of the hardest hit countries of the depression, why Australias economic policies were inadequate to help the Australian economy recover, and finally look at why Australias large foreign debt caused it to suffer so gravely from the depression.
The export based economy was one of the main reasons why Australia was hit so hard during the Great Depression, and was the reason why Australia was the one of the first countries to go into the depression. “The main burden is being borne by the growing numbers of unemployed and by the primary producers, who depend upon the export market To the thousands of Australians out of work through no fault of the own it is small consolation to say that it is the lot of many millions of people in the world today. It is only natural for the unemployed to regard the situation which confronts them as a challenge to our whole social system.” 7 Two of Australias main exports during the late 1920s and the 1930s were wool and wheat. 2 “in 1929 wool prices fell disastrously, followed by wheat prices in 1930.” 2 When the world economy collapsed, the demand for Australian goods collapsed as well. Australia was one of the first to go into the recession due to this. Australia was very reliant on trade with the United Kingdom 10. When the UK went into recession their demand for Australian goods fell. This caused Australias situation to worsen. Australia would import large amounts of industrial capital and manufactured goods from the UK and sold them agricultural goods and raw materials. 2 With the reduced amount of goods being imported from Australia, Australia was unable to continue importing the capital goods from the UK. This lead to a reduction in manufacturing capabilities in Australia, which in turn further worsened its situation. The use of the Gold-Standard prevented Australia from using a devaluated currency to offset the decrease in demand. 8 With a floated currency, the value of the Australian dollar would have decreased making Australian goods cheaper to buy. This in turn could have had a small impact in reducing the severity of the depression on Australia. Australia finally recovered from the great depression after much of the rest of the world did. Still reliant on exports to support the economy, Australia had to wait until prices for primary goods (agricultural and raw minerals) to stabilize around the world before it was able to recover.
Australia was one of the hardest hit countries during the depression. For most of the developed world, the great depression occurred during the Wall Street stock market crash in 1929. 8 For Australia, a depression was already apparent before the crash. 11 Before the crash, the unemployment rate was already at 10 percent, 11 which was far greater then the other world economies at that time. This represented a 4% increase in unemployment over a short period of time and is one of the reasons why Australia was one of the first countries to enter into the great depression. During the Great Depression, the unemployment increased to a high of 32% unemployment. 11 Australias unemployment rates were some of the highest in the world. The United States peaked at 24.9% unemployment during the depression. 4 The United Kingdom had unemployment at 20%. 5 Australia suffered far worse then most countries due to its export economy. Due to the fall in demand for exports,
the government took considerable action to ease it out of its international market. The government set up a fund to help finance the debt relief program.
Australia had to rely on imports. A record $8.55 billion of exports were cut out during the Great Depression. As a result, the economy was run up even in relative terms.
Australia’s GDP fell from $6.36 billion during the Great Depression to less than $1 million at the end of the Great Depression. In the post-Great Depression years, the decline was also notable. By the end of the Great Depression, Australia’s economy had shrunk by an average of an additional $1.4 billion. The government decided to cut back on the consumption and investment, particularly in education and health care.
During the Great Depression, Australia was a hotbed of foreign investment. In addition to the goods and services sector, about half of the foreign investment for Australia was overseas, which left the government in a financial position to buy a lot more Australian dollars and to borrow the money to do little else. 10 The federal government’s stimulus package, which was aimed at cutting international debt with increased revenue, was put in place during the Great Depression. The government decided to spend money on a major project of public procurement, the RIM fund.
This spending program would help save more than $2 billion in unemployment and more than $300 million by the end of the Great Depression.
For Australia, these savings would help cover a substantial amount of expenses, such as the cost of educating and healthcare. 9 There were many benefits for Australia throughout the Great Depression.
The first major benefit of using public funds to pay for public needs was the investment in health and education. 11 More research was required to determine the causes of health and economic problems in Australia.
In the early 1930’s, it was announced that the development of new treatments, new technology, improvements in medicines, or new ways of creating new diseases was needed for the welfare of the population. But then the war started. Although the Great Depression was in its early stages, it started with the destruction of most of the public infrastructure in Australia, and even though a number of Australian corporations and companies were able to benefit enormously from the War Government’s public-private partnership initiative, there were still numerous problems that need to be addressed.
The war made no impression on the public. In early 1935, the Department of Finance decided to give government funding to the National Trust which raised the size and scope of its financial support pool.
In 1936, Prime Minister James Joyce called the war a “big victory” for Australia, adding that the government was “ready to restore public confidence” for a more prosperous world and was in a state of preparation to return Australia to prosperity.
In 1939, the government went ahead with a massive stimulus package. The package included a massive $50 million loan on behalf of the Australian Railway Council to help reduce fuel cost, provide greater public transport options, and improve road safety.
The stimulus included a two-thirds tax increase of $500 million to help offset the damage to Australian infrastructure from the war. The Treasury announced a total of $535 million over five years for the program and $850 million for the reconstruction of roads, tunnels, and bridges.
In 1946, the government increased the budget for its public-private partnership initiative by 80% and created the Australia Government Education & Health program, with the Australian Health and Human Services Executive (ALHSIA). The next year, on January 6, 1947, the federal government agreed to double the amount of private student aid the government gave to all Australians to ensure that “all families should enjoy quality education for all children, regardless of race or background or nationality.” 12 Federal funding will go to programs such as education, medical care, research