Australia and the Great Depression

1704 WordsMay 24, 20077 Pages
Why 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 it's 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…show more content…
The large foreign debt that Australia held before the depression caused the effects of the Great Depression to be so grave. Before the depression, Australia was building large amounts of infrastructure. 2 This led them to accumulate large amounts of debt. The depression caused a reduction in economic activity which in turn lead to a reduction in tax revenues. With the reduction of the amount of tax revenue the government was earning, it made it very difficult for Australia to pay back its loans. Fearing that Australia would default on its loans, The Bank of England sent an envoy to the Australian government. Sir Otto Niemeyer told the government at a conference in Melbourne that they needed to limit government spending. This is known as the "Melbourne Agreement." 12 The Australian government's policy at the time was to cut back on spending. 9 This cutback in expenditure caused there to be less money available during the depression which further worsened its impact. Instead of spending more money in the economy by creating large public works projects and in turn creating employment, by reducing the amount of money spent in the economy, the Australian government made the situation much worse. During the depression, Australia large amounts of it's gold reserves to stay afloat. 9 "In the early 1930s, Bankers, who were the only source of new money or credit, deliberately refused loans to industry, commerce and agriculture." 6 The great
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