Great Depression in Australia

From ArticleWorld

The 1930’s Great Depression in Australia caused record high unemployment, civil unrest and political instability. Australia is considered to be one of the three most severely affected Western countries, the others being Canada and Germany. The main reason for this was the dependence the country had on exports, particularly wheat and wool.

The 1920’s

Australia was a very young country in the 1920’s, having only been granted federation in 1901. It was still very much a part of the British Empire, however, and relied on the UK for much of its trade and financial support. The UK was Australia’s largest trading partner, importing wheat and wool and exporting manufactured goods and financial capital. Unfortunately, the British economy had been slow since the end of the First World War and this had the effect of reducing its demand for imports in the 1920’s. This affected Australia badly by upsetting the balance of payments and causing unemployment to jump from 6% to 10%.

In the meantime, the 20’s was also a time of population growth in Australia mainly because of the subsidized immigration scheme sponsored by the British government. Cities expanded at a rapid rate which necessitated a massive residential construction boom. Infrastructure projects such as the building of the Sydney Harbour Bridge, the Sydney underground railway and various dams and highways, delayed because of the First World War, were begun at this time, paid for by loans raised on bond markets in London as well as in Australia and on Wall Street.

Then, in 1926, the British government decided to put the sterling back onto the Gold Standard at pre 1914 parity, with the result that British exports were not as competitive as before on the international markets. This had the effect of reducing export demand and falling commodity prices, thus wages in Australia could not go as high as the workers demanded resulting in a series of coal miner’s strikes in 1929 that crippled the Australian economy.

The 1930’s

In 1929, Wall Street collapsed, marking the beginning of the Great Depression. In Australia, commodity prices continues to plummet, unemployment reached a record high of 28% in 1932 and thousands of men left the bigger cities to try and find work in the agricultural sector.

The government found itself in the position where tax revenue was falling but the debts they had accumulated in the 20’s building spree still had to be paid. So began a series of belt tightening measures at a time when many Australians desperately needed economic help; with the result of political instability and change.

A slow recovery

Due to the fact that there was no official plan for economic recovery in Australia, unlike in the USA, UK and New Zealand, the country had to wait for improvements in other countries to trickle down; which it did over time. By the beginning of the Second World War, unemployment had decreased to 10%, industrial output had increased and a certain amount of prosperity had returned to Australia.