Great Depression in Australia

As in other nations, Australia had years of high unemployment, poverty, low profits, deflation, plunging incomes, and lost opportunities for economic growth and personal advancement.

Large sums of government money were made available to provide returned First World War servicemen with farmland and agricultural equipment under soldier settlement schemes.

Britain returned the pound sterling to the gold standard in 1925 at pre-1913 parity, effectively revaluing both currencies significantly and unleashing crushing deflationary pressures and falling export demand.

This had the immediate effect of making British and Australian exports far less competitive in non-British markets, and affected Australia's terms of trade.

Falling export demand and commodity prices placed massive downward pressures on wages, particularly in industries such as coal mining.

A riot at a picket line in the Hunter Region mining town of Rothbury saw police shoot one teenage coal miner dead.

The opposition Australian Labor Party, led by James Scullin, successfully depicted Stanley Bruce as wanting to destroy Australia's high wages and working conditions in the 1929 federal election.

[16] It entailed the balancing of the budget through expenditure and wage cuts, without additional overseas borrowing, necessitating reductions in social welfare programs, defence spending and other sweeping cutbacks.

Jack Lang, the Labor Party Leader of the Opposition in New South Wales and a fiery left-wing populist, campaigned vigorously against the provisions of the Melbourne Agreement.

Scullin departed for an Imperial economic conference in London, necessitating an absence of five months, during which time he managed to secure reduced interest payments for Australia.

[citation needed] The Lang Plan advocated the repudiation of interest payments to overseas creditors until domestic conditions improved, the abolition of the Gold Standard to be replaced by a Goods Standard where the amount of money in circulation was linked to the amount of goods produced, and the immediate injection of £18 million of new money into the economy in the form of Commonwealth Bank of Australia credit.

[16] The policy contrasted with the approach put forward by the British economist John Maynard Keynes and which was pursued by the United States, which held that governments needed to spend their way out of the Depression.

The Minister for Public Works and Railways, Joseph Lyons, led a conservative faction, which believed in the deflationary approach of balanced budgets and cuts in spending and opposed defaulting on debt repayments.

The stance of Joseph Lyons and James Fenton against the far more radical proposals of the Labor movement to deal with the Depression had attracted the support of prominent Australian conservatives, known as "the Group", whose number included future prime minister Robert Menzies.

In an effort to frustrate this move, Lang ordered State departments to pay all receipts directly to the Treasury instead of into Government bank accounts.

Single unemployed men had to make do in illegal camps or makeshift hostels in disused buildings, such as the old Redfern Fish Market.

[23][24][25] Shacks were built on the outskirts of large cities to house some who lost their homes, for example near the beach at Garie in the Royal National Park south of Sydney.

For Australians, the decade of the 1930s began with problems of huge unemployment, because the fall of the stock markets on Wall Street reduced confidence throughout the world.

[28] The depression's sudden and widespread unemployment hit the soldiers who had just returned from war the hardest as they were in their mid-thirties and still suffering the trauma of their wartime experiences.

[38] The rising star's world-beating cricketing exploits were to provide much needed joy to Australians through the emerging Great Depression and Post World War One recovery.

[40] Phar Lap sailed for the United States in 1931, going on to win North America's richest race, the Agua Caliente Handicap in Tijuana, Mexico, in 1932.

Unlike the United States, where Franklin Roosevelt's inflationary New Deal attempted to stimulate the American economy, New Zealand where Michael Savage's pioneering welfare state tried to reduce hardship, or the United Kingdom where rearmament (from 1936) increased deficit spending, there was no significant mechanism for inflationary Keynesian economic policy responses in Australia.

Some argued that Australia's protectionist high tariffs worked to hurt the economy and that influential interest groups sought no change in this aspect of policy.

Following Lyons' death in 1939, Robert Menzies assumed the United Australia Party leadership and the prime ministership, however the 1940 federal election resulted in a hung parliament.

A year later, Menzies' minority government was brought down in the House of Representatives when the two independents crossed the floor and switched their support to Labor, bringing John Curtin to power during World War II.

At the 1943 federal election, Curtin led Labor to their greatest House of Representatives victory both in terms of proportion of seats and their strongest national two-party vote.

Curtin and Chifley, who often used the spectre of another depression in their campaign rhetoric, utilised emergency wartime powers to introduce a command economy in Australia based on Keynesian principles.

This white paper served a variety of roles; to establish the priority of full employment; to ensure the depression would not recur; and to propose ways to make these objectives possible.

Between 1947 and 1949 Chifley also attempted to nationalise the banking sector, arguing that public control over the finance industry would assist in preventing further depressions.

In 1949, the combined perceived threats of international and domestic communism and industrial unrest along with the public's waning support for extended rationing and intervention following the close of the War saw the return of Menzies to the prime ministership.