Great Depression in Australia
Overview
 
Australia suffered badly during the period of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

 of the 1930s. The Depression began with the Wall Street Crash of October, 1929
Wall Street Crash of 1929
The Wall Street Crash of 1929 , also known as the Great Crash, and the Stock Market Crash of 1929, was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and duration of its fallout...

 and rapidly spread worldwide. As in other nations, Australia suffered years of high unemployment, poverty, low profits, deflation, plunging incomes, and lost opportunities for economic growth and personal advancement. The Australian economy and foreign policy generally still largely rested upon its place as a primary producer within the British Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...

 and Australia's important export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...

 industries, particularly primary products such as wool
Wool
Wool is the textile fiber obtained from sheep and certain other animals, including cashmere from goats, mohair from goats, qiviut from muskoxen, vicuña, alpaca, camel from animals in the camel family, and angora from rabbits....

 and wheat
Wheat
Wheat is a cereal grain, originally from the Levant region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize and rice...

, suffered significantly from the collapse in international demand.
Encyclopedia
Australia suffered badly during the period of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

 of the 1930s. The Depression began with the Wall Street Crash of October, 1929
Wall Street Crash of 1929
The Wall Street Crash of 1929 , also known as the Great Crash, and the Stock Market Crash of 1929, was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and duration of its fallout...

 and rapidly spread worldwide. As in other nations, Australia suffered years of high unemployment, poverty, low profits, deflation, plunging incomes, and lost opportunities for economic growth and personal advancement. The Australian economy and foreign policy generally still largely rested upon its place as a primary producer within the British Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...

 and Australia's important export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...

 industries, particularly primary products such as wool
Wool
Wool is the textile fiber obtained from sheep and certain other animals, including cashmere from goats, mohair from goats, qiviut from muskoxen, vicuña, alpaca, camel from animals in the camel family, and angora from rabbits....

 and wheat
Wheat
Wheat is a cereal grain, originally from the Levant region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize and rice...

, suffered significantly from the collapse in international demand. Unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

 reached a record high of 23% in 1938, (although 32% has also been quoted) and gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 declined by 10% between 1929 and 1931. There were also incidents of civil unrest, particularly in Australia's largest city, Sydney
Sydney
Sydney is the most populous city in Australia and the state capital of New South Wales. Sydney is located on Australia's south-east coast of the Tasman Sea. As of June 2010, the greater metropolitan area had an approximate population of 4.6 million people...

. Though Australian Communist and far right movements were active in the Depression, they remained largely on the periphery of Australian politics, failing to achieve the power shifts obtained in Europe, and the democratic political system of the young Australian Federation survived the strain of the period.

The Scullin Labor Government had just assumed power in 1929 when the downturn struck. The Labor movement split over how to deal with the crisis, with Treasurer Ted Theodore
Ted Theodore
Edward Granville Theodore was an Australian politician. He was Premier of Queensland 1919–25, a federal politician representing a New South Wales seat 1927–31, and Federal Treasurer 1929–30.-Early life:...

 failing to have his inflationary plan pass Parliament, New South Wales Premier Jack Lang
Jack Lang
Jack Lang may refer to:*Jack Lang *Jack Lang *Jack Lang , former American football player*Jack Lang , American sportswriter...

 losing office over a proposal to default on international loan payments, and Labor defector Joseph Lyons
Joseph Lyons
Joseph Aloysius Lyons, CH was an Australian politician. He was Labor Premier of Tasmania from 1923 to 1928 and a Minister in the James Scullin government from 1929 until his resignation from the Labor Party in March 1931...

 forming the United Australia Party
United Australia Party
The United Australia Party was an Australian political party that was founded in 1931 and dissolved in 1945. It was the political successor to the Nationalist Party of Australia and predecessor to the Liberal Party of Australia...

 which provided stable and more fiscally conservative government from 1932 until his death in 1939. Thus Australia, unlike the United States, did not embark on a significant Keynsian program of spending to recover from the Depression. Nevertheless, the Australian recovery began around 1932. Australians took consolation from sporting achievements through the Depression, with cricketer Don Bradman and race horse Pharlap achieving longlasting fame.

1920s: The calm before the storm

World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

 had depleted Britain's savings and foreign investments, and wartime inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 had upset the United Kingdom's terms of trade
Terms of trade
In international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...

. A sluggish economy in Britain naturally reduced British demand for imports from Australia throughout the 1920s and this had affected Australia's balance of payments also. Throughout the 1920s the Australian unemployment rate floated between 6% and 11%.

The Great War had also caused many necessary infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...

 projects to be delayed or abandoned, and many of these were begun in the 1920s, including the Sydney Harbour Bridge
Sydney Harbour Bridge
The Sydney Harbour Bridge is a steel through arch bridge across Sydney Harbour that carries rail, vehicular, bicycle and pedestrian traffic between the Sydney central business district and the North Shore. The dramatic view of the bridge, the harbour, and the nearby Sydney Opera House is an iconic...

 and Sydney's underground railway system in addition to the Commonwealth government
Government of Australia
The Commonwealth of Australia is a federal constitutional monarchy under a parliamentary democracy. The Commonwealth of Australia was formed in 1901 as a result of an agreement among six self-governing British colonies, which became the six states...

 beginning to fund major highways. New dam
Dam
A dam is a barrier that impounds water or underground streams. Dams generally serve the primary purpose of retaining water, while other structures such as floodgates or levees are used to manage or prevent water flow into specific land regions. Hydropower and pumped-storage hydroelectricity are...

s and grain elevator
Grain elevator
A grain elevator is a tower containing a bucket elevator, which scoops up, elevates, and then uses gravity to deposit grain in a silo or other storage facility...

s were built, and the rural railway network was expanded in nearly every state. Large sums of government money were made available to provide returned First World War servicemen with farmland and agricultural equipment under soldier settlement
Soldier settlement (Australia)
Soldier settlement refers to the occupation and settlement of land throughout parts of Australia by returning discharged soldiers under schemes administered by the State Governments after World Wars I and II.- World War I :...

 schemes. All these publicly funded projects were paid for by loans raised by both state and federal governments. Most of these loans were raised on capital markets in the City of London
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...

 at an average of £30 million per annum.

1929: The storm erupts

In 1925 the British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 government decided to put the pound sterling back onto the Gold Standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

 at pre-1913 parity. This had the immediate effect of making British exports far less competitive in international markets. Because Australia pegged the Australian pound to the pound sterling, this also affected Australian terms of trade.

Falling export demand and commodity prices placed massive downward pressures on wages, particularly in industries such as coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

 mining. Due to falling prices, bosses were unable to pay the wages that workers wanted. The result was a series of crippling strikes in many sectors of the economy in the late 1920s. Coal miners' strikes in the winter of 1929 brought much of the economy to its knees. A riot at a picket line
Picket line
A picket line is a horizontal rope, along which horses are tied at intervals. The rope can be on the ground, at chest height , or overhead. The overhead form usually is called a high line....

 in the Hunter Valley
Hunter Valley
The Hunter Region, more commonly known as the Hunter Valley, is a region of New South Wales, Australia, extending from approximately to north of Sydney with an approximate population of 645,395 people. Most of the population of the Hunter Region lives within of the coast, with 55% of the entire...

 mining town of Rothbury
Rothbury, New South Wales
Rothbury is a small town located in the Hunter Valley region of New South Wales, Australia. It is 10 km from Cessnock. At the 2006 census, Rothbury had a population of 309 people....

 saw police shoot one teenage coal miner dead.

The conservative Prime Minister of Australia
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...

, Stanley Bruce
Stanley Bruce
Stanley Melbourne Bruce, 1st Viscount Bruce of Melbourne, CH, MC, FRS, PC , was an Australian politician and diplomat, and the eighth Prime Minister of Australia. He was the second Australian granted an hereditary peerage of the United Kingdom, but the first whose peerage was formally created...

, wished to dismantle the conciliation and arbitration
Conciliation and Arbitration Act 1904
The Conciliation and Arbitration Act 1904 was an Australian Commonwealth Government Act "relating to Conciliation and Arbitration for the Prevention and Settlement of Industrial Disputes extending beyond the Limits of any one State", and was assented to on 15 December 1904, almost four years after...

 system of judicially-supervised collective bargaining
Collective bargaining
Collective bargaining is a process of negotiations between employers and the representatives of a unit of employees aimed at reaching agreements that regulate working conditions...

 which had been the cornerstone of Australia's industrial relations system since the 1900s. Arbitration made it difficult for employers to adjust wages in response to market conditions.

The opposition Australian Labor Party
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...

, led by James Scullin
James Scullin
James Henry Scullin , Australian Labor politician and the ninth Prime Minister of Australia. Two days after he was sworn in as Prime Minister, the Wall Street Crash of 1929 occurred, marking the beginning of the Great Depression and subsequent Great Depression in Australia.-Early life:Scullin was...

, successfully depicted Stanley Bruce as wanting to destroy Australia's high wages and working conditions in the 1929 federal election
Australian federal election, 1929
Federal elections were held in Australia on 12 October 1929. All 75 seats in the House of Representatives were up for election, with no Senate seats up for election, as a result of Billy Hughes and other rebel backbenchers crossing the floor over industrial relations legislation, depriving the...

. Scullin was elected Prime Minister in a landslide which saw Stanley Bruce voted out as the Member for Flinders
Division of Flinders
The Division of Flinders is an Australian Electoral Division in Victoria. The division was one of the original 75 divisions contested at the first federal election...

, the only time prior to the 2007 federal election that a sitting Prime Minister lost his seat.

1929-1935: Scullin and Lang

The Scullin Labor Government was sworn in on 21 October 1929. The Wall Street Crash took place within the first week of James Scullin
James Scullin
James Henry Scullin , Australian Labor politician and the ninth Prime Minister of Australia. Two days after he was sworn in as Prime Minister, the Wall Street Crash of 1929 occurred, marking the beginning of the Great Depression and subsequent Great Depression in Australia.-Early life:Scullin was...

's government and from the outset it was buffeted by the effects of the global economic crisis.

Throughout Scullin's term, commodity prices continued to fall, unemployment rose, and Australia's big cities were depopulated as thousands of unemployed men took to the countryside in search of menial agricultural work. The stagnant economy had reduced economic activity and therefore tax revenues. However, the debt commitments of both state and federal governments remained the same. Australia became severely at risk of defaulting on its foreign debt which had been accumulated during the relative prosperity and infrastructure-building frenzy of the 1920s.

The Great Depression in Australia saw huge levels of unemployment and economic suffering amid plummeting export income. Although the economic downturn was a product of international events, Australian governments grappled with how to respond. Conventional economists said governments should pursue deflationary policies. Radicals proposed inflationary responses and increased government spending. Division emerged within the Labor Party over how to respond.

Scullin invited Sir Otto Niemeyer
Otto Niemeyer
Sir Otto Ernst Niemeyer, GBE, KCB was financial controller at the Treasury and a director at the Bank of England. He was also treasurer of the National Association of Mental Health post World War II...

 of the Bank of England to come to Australia to advise on economic policy. Niemeyer recommended a traditional deflationary response of balanced budgets to combat Australia's high levels of debt and insisted that interest on loans be met. Labor Treasurer Ted Theodore
Ted Theodore
Edward Granville Theodore was an Australian politician. He was Premier of Queensland 1919–25, a federal politician representing a New South Wales seat 1927–31, and Federal Treasurer 1929–30.-Early life:...

 meanwhile supported the view of John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 that an inflationary policy of increased government spending was required. The Senate and Commonwealth Bank rejected his spending plans. The Labor Premier of New South Wales meanwhile announced the Lang Plan in February 1931, which entailed a cessation of interest repayments on debts to Britain and that interest on all government borrowings be reduced by 3% to free up money for injection into the economy.

In August 1930, a Bank of England delegation led by Niemeyer, had met with Federal and State leaders at a conference in Melbourne. The "Melbourne Plan", an economic plan devised by the Niemeyer group and Robert Gibson was agreed to by the premiers and Prime Minister Scullin. 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.

Starting in September 1930, the Australian Banks began to slowly devalue the Australian Pound, and a year later it had been devalued 30% against the Pound Sterling.

In early 1931 the Federal Government defaulted on interest payments on its bonds, forcing a reduction from 9 to 3 percent.

Jack Lang
Jack Lang (Australian politician)
John Thomas Lang , usually referred to as J.T. Lang during his career, and familiarly known as "Jack" and nicknamed "The Big Fella" was an Australian politician who was Premier of New South Wales for two terms...

, the Labor Party Leader of the Opposition
Opposition (parliamentary)
Parliamentary opposition is a form of political opposition to a designated government, particularly in a Westminster-based parliamentary system. Note that this article uses the term government as it is used in Parliamentary systems, i.e. meaning the administration or the cabinet rather than the state...

 in New South Wales
New South Wales
New South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...

 and a fiery left-wing populist
Populism
Populism can be defined as an ideology, political philosophy, or type of discourse. Generally, a common theme compares "the people" against "the elite", and urges social and political system changes. It can also be defined as a rhetorical style employed by members of various political or social...

, campaigned vigorously against the provisions of the Melbourne Agreement. He was elected in a landslide in the NSW state election of 1930.

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. With James Fenton as acting Prime Minister and Joseph Lyons as acting treasurer in his absence, Labor continued to negotiate Australia's economic response - with Fenton and Lyons advocating a more conservative fiscal approach and the unions and caucus calling for repudiation of debts.

In 1931 at an economic crisis conference in Canberra
Canberra
Canberra is the capital city of Australia. With a population of over 345,000, it is Australia's largest inland city and the eighth-largest city overall. The city is located at the northern end of the Australian Capital Territory , south-west of Sydney, and north-east of Melbourne...

, Jack Lang issued his own programme for economic recovery. 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. The Prime Minister and all other state Premiers refused.

With the rejection of the Theodore and Lang inflationary plans, the governments of Australia met to negotiate a compromise in 1931. The resulting Premiers' Plan
Premiers' Plan
The Premiers' Plan was a deflationary economic policy agreed by a meeting of the State Premiers of Australia in June 1931 to combat the Great Depression.-Background:...

 required the Australian Federal and State governments to cut spending by 20%, including cuts to wages and pensions and was to be accompanied by tax increases, reductions in interest on bank deposits and a 22.5% reduction in the interest the government paid on internal loans.

The policy contrasted with the approach put forward by the British economist John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 and which was pursued by the United States, which held that governments needed to "spend" their way out of the Depression. The plan was signed by New South Wales Labor Premier Jack Lang
Jack Lang
Jack Lang may refer to:*Jack Lang *Jack Lang *Jack Lang , former American football player*Jack Lang , American sportswriter...

, but he was a notable critic of its underlying philosophy and went on to pursue his own policy of defaulting on debt repayments, which led to confrontation with the Federal Scullin and Lyons Government
Lyons Government
The Lyons Government was the federal Executive Government of Australia led by Prime Minister Joseph Lyons. It was made up of members of a United Australia Party in the Australian Parliament from January 1932 until the death of Joseph Lyons in 1939. Lyons negotiated a coalition with the Country...

s and resulted in the Lang Dismissal Crisis
Lang Dismissal Crisis
The 1932 dismissal of Premier Jack Lang by New South Wales Governor Philip Game was the first real constitutional crisis in Australia. Lang remains the only Australian Premier to be removed from office by his Governor, using the Reserve Powers of the Crown....

 of 1932.

The Labor Party soon split into three separate factions. Jack Lang and his supporters, mainly in New South Wales, were expelled from the party and formed a left-wing splinter party officially known as the "New South Wales Labor Party," popularly known as "Lang Labor". The Minister for Public Works and Railways, Joseph Lyons
Joseph Lyons
Joseph Aloysius Lyons, CH was an Australian politician. He was Labor Premier of Tasmania from 1923 to 1928 and a Minister in the James Scullin government from 1929 until his resignation from the Labor Party in March 1931...

, led a conservative faction, which believed in a fiscally conservative approach of balanced budgets and cuts in spending and opposed defaulting on debt repayments. When the more radical Ted Theodore
Ted Theodore
Edward Granville Theodore was an Australian politician. He was Premier of Queensland 1919–25, a federal politician representing a New South Wales seat 1927–31, and Federal Treasurer 1929–30.-Early life:...

 was reinstated as Treasurer by Scullin on 29 January, Joseph Lyons and James Fenton along with three others resigned from the government. Merging with the opposition Nationalist Party, they form the United Australia Party
United Australia Party
The United Australia Party was an Australian political party that was founded in 1931 and dissolved in 1945. It was the political successor to the Nationalist Party of Australia and predecessor to the Liberal Party of Australia...

. An Australian Labor Party rump remained with Scullin as Prime Minister and Theodore as Treasurer.

Lyons Government

The stance of Joseph Lyons and James Fenton against the more radical proposals of the Labor movement to deal the Depression had attracted the support of prominent Australian conservatives, known as "the Group", whose number included future prime minister Robert Menzies
Robert Menzies
Sir Robert Gordon Menzies, , Australian politician, was the 12th and longest-serving Prime Minister of Australia....

. In parliament on 13 March 1931, though still a member of the ALP, Lyons supported a no confidence motion against the Scullin Labor government. The United Australia Party
United Australia Party
The United Australia Party was an Australian political party that was founded in 1931 and dissolved in 1945. It was the political successor to the Nationalist Party of Australia and predecessor to the Liberal Party of Australia...

 was then formed from a coalition of citizens’ groups and with the support of the Nationalist Party of Australia
Nationalist Party of Australia
The Nationalist Party of Australia was an Australian political party. It was formed on 17 February 1917 from a merger between the conservative Commonwealth Liberal Party and the National Labor Party, the name given to the pro-conscription defectors from the Australian Labor Party led by Prime...

. Lyons quit the ALP to become parliamentary leader of the newly established United Australia Party, with John Latham, Nationalist Leader of the Opposition, becoming the new party's deputy leader.

In November 1931, Lang Labor
Jack Lang
Jack Lang may refer to:*Jack Lang *Jack Lang *Jack Lang , former American football player*Jack Lang , American sportswriter...

 dissidents chose to challenge the Scullin Labor government and align with the United Australia Party Opposition to pass a ‘no confidence’ and the government fell. At the consquent election on 19 December, Labor lost all but 14 of its seats, and the United Australia Party commenced its first term in government in January 1932.

Before being voted out of office, the Scullin government had covered NSW's debt default. The federal government had paid NSW's bond installments and intended to recoup this money from the NSW Government. A dramatic episode in Australian history followed Lyons first electoral victory. When NSW Premier Jack Lang refused to pay interest on overseas State debts, the Lyons government stepped in and paid the debts and then passed the Financial Agreement Enforcement Act to recover the money it had paid. 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. The New South Wales Governor, Sir Philip Game
Philip Game
Air Vice-Marshal Sir Philip Woolcott Game GCB, GCVO, GBE, KCMG, DSO was a British Royal Air Force commander, who later served as Governor of New South Wales and Commissioner of Police of the Metropolis...

, intervened on the basis that Lang had acted illegally in breach of the state Audit Act and sacked the Lang Government
Lang Dismissal Crisis
The 1932 dismissal of Premier Jack Lang by New South Wales Governor Philip Game was the first real constitutional crisis in Australia. Lang remains the only Australian Premier to be removed from office by his Governor, using the Reserve Powers of the Crown....

, who then suffered a landslide loss at the consequent 1932 state election.

Australia recovered relatively quickly from the financial downturn of 1929-1930, with recovery beginning around 1932. Prime Minister Joseph Lyons was the leader responsible for stewarding Australia out of this difficult period. Lyons favoured the tough economic measures of the Premiers' Plan
Premiers' Plan
The Premiers' Plan was a deflationary economic policy agreed by a meeting of the State Premiers of Australia in June 1931 to combat the Great Depression.-Background:...

, pursued an orthodox fiscal policy and refused to accept NSW Premier Jack Lang's proposals to default on overseas debt repayments. Australia entered the Depression with a debt crisis and a credit crisis. According to author Anne Henderson
Anne Henderson
Anne Henderson is an Australian writer, best known as the Deputy Director of The Sydney Institute and editor of The Sydney Papers....

 of the Sydney Institute
Sydney Institute
The Sydney Institute, founded in 1989, is a privately funded, conservative, Australian current affairs forum. The Sydney Institute took over the resources of the Sydney Institute of Public Affairs which ceased activity in the late 1980s...

, Lyons held a steadfast belief in "the need to balance budgets, lower costs to business and restore confidence" and the Lyons period gave Australia "stability and eventual growth" between the drama of the Depression and the outbreak of the Second World War. A lowering of wages was enforced and industry tariff protections maintained, which together with cheaper raw materials during the 1930s saw a shift from agriculture to manufacturing as the chief employer of the Australian economy - a shift which was consolidated by increased investment by the commonwealth government into defence and armaments manufacture. Lyons saw restoration of Australia's exports as the key to economic recovery. A devalued Australian currency assisted in restoring a favourable balance of trade.

Varying experiences of the Great Depression

During the Great Depression, different parts of Australian society experienced different hardships, challenges and opportunities. There was increased movement of many people to and from country areas in search of work. City and urban people planted gardens to produce fruit and vegetables. In some urban areas co-operatives were formed based on barter systems to share what was available. 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. There has been anecdotal evidence of families resorting to living in caves with authorities turning a blind eye as there were no other accommodation available.

Unemployed Australians

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. Most governments reacted to the crisis with similar policies, aimed at slashing back government spending and paying back loans. The Australian government could do little to change the effects of the slump and the tough economic times ahead. This affected the country in many ways.

Because of the economic downturn, people’s lives changed drastically. Australia had supplied huge amounts of wool for uniforms during World War 1, and many exports helped Australia achieve a high standard of living in the 1920s. The majority of the people of Australia lived very well prior to the fall, so they felt the effects of the depression strongly. Because of the severe economic contraction, the reduction of purchasing goods, employers couldn’t afford to keep excessive workers. A five year unemployment average for 1930-34 was 23.4%,with a peak of 30% of the nation being unemployed in 1932. This was one of the most severe unemployment rates in the industrialised world, exceeded only by Germany.

Many hundreds of thousands of Australians suddenly faced the humiliation of poverty and unemployment. This was still the era of traditional social family structure, where the man was expected to be the sole bread winner. Soup kitchens and charity groups made brave attempts to feed the many starving and destitute. The suicide rates increased dramatically and it became clear that Australia had limits to the resources for dealing with the crisis. The depression's sudden and wide spread 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. At night many slept covered in newspapers at Sydney’s Domain or at Salvation Army refugees.

The limited jobs that did arise were viciously fought for. The job vacancies were advertised in the daily newspaper, which formed massive queues to search for any job available. This then caused the race to arrive first at the place of employment (the first person to turn up was usually hired.) This is depicted in the Australian film Caddie
Caddie (film)
Caddie is an Australian film, directed by Donald Crombie, released in 1976, and belonging to the Australian film renaissance which occurred during that decade....

.


Culture and society

Extraordinary sporting successes did something to alleviate the spirits of Australians during the economic downturn. In a Sheffield Shield cricket match at the Sydney Cricket Ground
Sydney Cricket Ground
The Sydney Cricket Ground is a sports stadium in Sydney in Australia. It is used for Australian football, Test cricket, One Day International cricket, some rugby league and rugby union matches and is the home ground for the New South Wales Blues cricket team and the Sydney Swans of the Australian...

 in 1930, Don Bradman, a young New South Welshman of just 21 years of age wrote his name into the record books by smashing the previous highest batting score in first-class cricket with 452 runs not out in just 415 minutes. The rising star's world beating cricketing exploits were to provide much needed joy to Australians through the emerging Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

 and Post World War One recovery.

Between 1929 and 1931 the legendary racehorse Phar Lap
Phar Lap
Phar Lap was a champion Thoroughbred racehorse whose achievements captured the public's imagination during the early years of the Great Depression. Foaled in New Zealand, he was trained and raced in Australia. Phar Lap dominated Australian racing during a distinguished career, winning a Melbourne...

 dominated Australia's racing industry, at one stage winning fourteen races in a row. Famous victories included the 1930 Melbourne Cup
Melbourne Cup
The Melbourne Cup is Australia's major Thoroughbred horse race. Marketed as "the race that stops a nation", it is a 3,200 metre race for three-year-olds and over. It is the richest "two-mile" handicap in the world, and one of the richest turf races...

, following an assassination attempt and carrying 9 stone 12 pounds weight. Phar Lap sailed for the United States in 1931, going on to win North America's richest race, the Agua Caliente Handicap
Agua Caliente Handicap
The Agua Caliente Handicap is a defunct thoroughbred horse race that was once the premier event at Agua Caliente Racetrack in Tijuana, Baja California, Mexico, and the richest race in North America...

 in 1932. Soon after, on the cusp of US success, Phar Lap developed suspicious symptoms and died. Theories swirled that the champion race horse had been poisoned and a devoted Australian public went in to shock.

The 1938 British Empire Games
1938 British Empire Games
The 1938 British Empire Games was the third British Empire Games, the Commonwealth Games being the modern-day equivalent. Held in Sydney, New South Wales, Australia from February 5–12, 1938, they were timed to coincide with Sydney's sesqui-centenary...

 were held in Sydney from 5–12 February, timed to coincide with Sydney's sesqui-centenary (150 years since the foundation of British settlement in Australia).

1932-1939: A slow recovery

Unlike the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, where Franklin Roosevelt's New Deal
New Deal
The New Deal was a series of economic programs implemented in the United States between 1933 and 1936. They were passed by the U.S. Congress during the first term of President Franklin D. Roosevelt. The programs were Roosevelt's responses to the Great Depression, and focused on what historians call...

 attempted to stimulate the American economy, New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...

 where Michael Savage
Michael Joseph Savage
Michael Joseph Savage was the first Labour Prime Minister of New Zealand.- Early life :Born in Tatong, Victoria, Australia, Savage first became involved in politics while working in that state. He emigrated to New Zealand in 1907. There he worked in a variety of jobs, as a miner, flax-cutter and...

's pioneering welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...

 tried to reduced hardship, or the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 where rearmament (from 1936) increased deficit spending, there was no significant mechanism for Keneysian policy responses in Australia.

Federation in 1901 had granted only limited power to the federal government. For example, income taxes were collected by the State governments. High tariffs worked to hurt the economy, but powerful interest groups permitted no change in this aspect of policy. There was no significant banking reform or nationalisation of private businesses.

The devaluation of the Australian pound, abandonment of the Gold Standard, recovery of major trading partners like the United Kingdom and public works
Public works
Public works are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community...

 projects instituted by State and local government
Local government
Local government refers collectively to administrative authorities over areas that are smaller than a state.The term is used to contrast with offices at nation-state level, which are referred to as the central government, national government, or federal government...

s led to a slow recovery. Unemployment, which peaked at 29% in 1932, was 11% at the start of the Second World War compared to 17.2% in the United States, where the federal government took a much more active role in promoting recovery.

Legacy of the Great Depression in Australia

During the Second World War, the Australian Labor Party formed a government in the House of Representatives
Australian House of Representatives
The House of Representatives is one of the two houses of the Parliament of Australia; it is the lower house; the upper house is the Senate. Members of Parliament serve for terms of approximately three years....

, led by two socialist
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

 prime ministers: John Curtin
John Curtin
John Joseph Curtin , Australian politician, served as the 14th Prime Minister of Australia. Labor under Curtin formed a minority government in 1941 after the crossbench consisting of two independent MPs crossed the floor in the House of Representatives, bringing down the Coalition minority...

 (1941–1945) and Ben Chifley
Ben Chifley
Joseph Benedict Chifley , Australian politician, was the 16th Prime Minister of Australia. He took over the Australian Labor Party leadership and Prime Ministership after the death of John Curtin in 1945, and went on to retain government at the 1946 election, before being defeated at the 1949...

 (1945–1949). Curtin and Chifley, who often used the spectre of another depression in his campaign rhetoric, used emergency wartime powers to introduce a command economy in Australia based on Keynesian
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 principles. Unemployment was virtually eliminated in this period, being reduced below 2 percent. In 1942 income tax became federally controlled with the states conceding that the war effort needed a centrally controlled financial basis.

Chifley also attempted to nationalise
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...

 the banking sector, claiming that public control over the finance industry would assist in preventing further depressions. These plans saw bitter and protracted opposition from the media, conservative parties and the banks themselves, and the High Court of Australia
High Court of Australia
The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the States, and...

 ruled that the proposed nationalisation of banks was unconstitutional.

In 1944 Curtin announced the plan for a white paper on full employment. 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. Dr H C 'Nugget' Coombs as director-general of the Reconstruction Ministry had major input into this policy. The economic theories proposed by J M Keynes in 1936 were a major influence on the white paper.

Chifley's government was soundly defeated by the Liberal
Liberal Party of Australia
The Liberal Party of Australia is an Australian political party.Founded a year after the 1943 federal election to replace the United Australia Party, the centre-right Liberal Party typically competes with the centre-left Australian Labor Party for political office...

-Country Party
National Party of Australia
The National Party of Australia is an Australian political party.Traditionally representing graziers, farmers and rural voters generally, it began as the The Country Party, but adopted the name The National Country Party in 1975, changed to The National Party of Australia in 1982. The party is...

 Coalition led by Robert Menzies
Robert Menzies
Sir Robert Gordon Menzies, , Australian politician, was the 12th and longest-serving Prime Minister of Australia....

 in 1949. Though Menzies was a conservative, his sixteen subsequent years in power saw the government continue the use of Keynesian methods in economic policy as well as further expansion of the welfare state and public services such as higher education
Higher education
Higher, post-secondary, tertiary, or third level education refers to the stage of learning that occurs at universities, academies, colleges, seminaries, and institutes of technology...

, research and development
Research and development
The phrase research and development , according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of...

 and public housing
Public housing
Public housing is a form of housing tenure in which the property is owned by a government authority, which may be central or local. Social housing is an umbrella term referring to rental housing which may be owned and managed by the state, by non-profit organizations, or by a combination of the...

. Public support for these may have been a legacy of mass experiences of poverty during the Great Depression.

See also

  • The Susso
    The Susso
    The Susso is an Australian slang term referring to "sustenance" payments, especially during the Great Depression. "Susso" could also be used as a noun, for someone depending on such payments, often unsympathetically.- Causes :...

    , welfare in Australia originating in the Great Depression

External links

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