The Australian Crisis

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LIKE other countries, Australia is experiencing difficulties and hardship by reason of the general decline in prices. But in Australia's case the difficulties are increased by three special factors, for two of which she must accept sole responsibility, while the third is due to causes over which she has no control. These factors are: first, the high cost of production in all local industries, whether primary or secondary, due to the prevalence of protection on the grand scale and a rigid system of arbitration or wage-fixing tribunals; second, extravagant overseas borrowing for many years, with a large interest bill payable annually outside the country; and third, the general fall in the price of Australia's two staple products, wool and wheat.

THE PAST

The Australian Commonwealth is a federation (based largely on the United States model) of political entities which prior to 1901 were separate colonies. At the time of federation those colonies were in varying stages of development. New South Wales, the oldest, had received responsible government in 1856, but Western Australia, the largest in area though the smallest in population and wealth, did not receive that inestimable boon until 1891. All the colonies relied largely, even then, upon loan money for their development; apart from this family weakness, there were many divergencies in their fiscal policies. New South Wales was avowedly free trade, and her secondary industries were thriving under that régime. The next most populous colony, Victoria, was as strongly protectionist. The outlying colonies (Queensland, South Australia, Western Australia, and Tasmania) had few secondary industries to foster but imposed tariffs for revenue purposes. These tariffs applied, of course, to colonial neighbors as well as to the British Empire and all foreign countries...