Great Depression

Main article: Great Depression in Australia
 
In 1931, over 1,000 unemployed men marched from the Esplanade to the Treasury Building in Perth, Western Australia to see Premier Sir James Mitchell.
Ribbon ceremony to open the Sydney Harbour Bridge on 20 March 1932. Breaking protocol, the soon to be dismissed Premier Jack Lang cuts the ribbon while Governor Philip Game looks on.Australia was deeply affected by the Great Depression of the 1930s, particularly due to its heavy dependence on exports, especially primary products such as wool and wheat,[274] Exposed by continuous borrowing to fund capital works in the 1920s, the Australian and state governments were "already far from secure in 1927, when most economic indicators took a turn for the worse. Australia's dependence of exports left her extraordinarily vulnerable to world market fluctuations," according to economic historian Geoff Spenceley.[275] Debt by the state of New South Wales accounted for almost half of Australia's accumulated debt by December 1927. The situation caused alarm amongst a few politicians and economists, notably Edward Shann of the University of Western Australia, but most political, union and business leaders were reluctant to admit to serious problems.[276] In 1926, Australian Finance magazine described loans as occurring with a "disconcerting frequency" unrivalled in the British Empire: "It may be a loan to pay off maturing loans or a loan to pay the interest on existing loans, or a loan to repay temporary loans from the bankers...[277] Thus, well before the Wall Street Crash of 1929, the Australian economy was already facing significant difficulties. As the economy slowed in 1927, so did manufacturing and the country slipped into recession as profits slumped and unemployment rose.[278]

At elections held in October 1929 the Labor Party was swept to power in a landslide and Stanley Bruce, the former Prime Minister, lost his own seat. The new Prime Minister, James Scullin, and his largely inexperienced government were almost immediately faced with a series of crises. Hamstrung by their lack of control of the Senate, a lack of control over the banking system and divisions within their party over how best to deal with the situation, the government was forced to accept solutions that eventually split the party, as it had in 1917. Some gravitated to New South Wales Premier Lang, others to Prime Minister Scullin.

Various "plans" to resolve the crisis were suggested; Sir Otto Niemeyer, a representative of the English banks who visited in mid-1930, proposed a deflationary plan, involving cuts to government spending and wages. Treasurer Ted Theodore proposed a mildly inflationary plan, while the Labor Premier of New South Wales, Jack Lang, proposed a radical plan which repudiated overseas debt.[279] The "Premier's Plan" finally accepted by federal and state governments in June 1931, followed the deflationary model advocated by Niemeyer and included a reduction of 20 per cent in government spending, a reduction in bank interest rates and an increase in taxation.[280] In March 1931, Lang announced that interest due in London would not be paid and the Federal government stepped in to meet the debt. In May, the Government Savings Bank of New South Wales was forced to close. The Melbourne Premiers' Conference agreed to cut wages and pensions as part of a severe deflationary policy but Lang renounced the plan. The grand opening of the Sydney Harbour Bridge in 1932 provided little respite to the growing crisis straining the young federation. With multimillion pound debts mounting, public demonstrations and move and counter-move by Lang and the Scullin, then Lyons federal governments, the Governor of New South Wales, Philip Game, had been examining Lang's instruction not to pay money into the Federal Treasury. Game judged it was illegal. Lang refused to withdraw his order and, on 13 May, he was dismissed by Governor Game. At June elections, Lang Labor's seats collapsed.[281]

May 1931 had seen the creation of a new conservative political force, the United Australia Party formed by breakaway members of the Labor Party combining with the Nationalist Party. At Federal elections in December 1931, the United Australia Party, led by former Labor member Joseph Lyons, easily won office. They remained in power until September 1940. The Lyons government has often been credited with steering recovery from the depression, although just how much of this was owed to their policies remains contentious.[282] Stuart Macintyre also points out that although Australian GDP grew from £386.9 million to £485.9 million between 1931–32 and 1938–39, real domestic product per head of population was still "but a few shillings greater in 1938–39 (£70.12), than it had been in 1920–21 (£70.04).[283]

 
21-year-old Don Bradman is chaired off the cricket pitch after scoring a world record 452 runs not out in 1930. Sporting success lifted Australian spirits through the Depression years.Australia recovered relatively quickly from the financial downturn of 1929–1930, with recovery beginning around 1932. The Prime Minister, Joseph Lyons, favoured the tough economic measures of the Premiers' Plan, pursued an orthodox fiscal policy and refused to accept the proposals of the Premier of New South Wales, Jack Lang, to default on overseas debt repayments. According to author Anne Henderson of the Sydney Institute, 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.[284]

 
Phar Lap, c. 1930.There is debate over the extent reached by unemployment in Australia, often cited as peaking at 29 per cent in 1932. "Trade Union figures are the most often quoted, but the people who were there...regard the figures as wildly understating the extent of unemployment" wrote historian Wendy Lowenstein in her collection of oral histories of the Depression.[285] However, David Potts argues that "over the last thirty years ...historians of the period have either uncritically accepted that figure (29% in the peak year 1932) including rounding it up to 'a third,' or they have passionately argued that a third is far too low."[286] Potts suggests a peak national figure of 25 per cent unemployed.[287]

However, there seems little doubt that there was great variation in levels of unemployment. Statistics collected by historian Peter Spearritt show 17.8 per cent of men and 7.9 per cent of women unemployed in 1933 in the comfortable Sydney suburb of Woollahra. In the working class suburb of Paddington, 41.3 per cent of men and 20.7 per cent of women were listed as unemployed.[288] Geoffrey Spenceley argues that apart from variation between men and women, unemployment was also much higher in some industries, such as the building and construction industry, and comparatively low in the public administrative and professional sectors.[289] In country areas, worst hit were small farmers in the wheat belts as far afield as north-east Victoria and Western Australia, who saw more and more of their income absorbed by interest payments.[290]

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 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.[291] The rising star's world beating cricketing exploits were to provide Australians with much needed joy through the emerging Great Depression and Post World War Two recovery. Between 1929 and 1931 the racehorse Phar Lap dominated Australia's racing industry, at one stage winning fourteen races in a row.[292] Famous victories included the 1930 Melbourne Cup, following an assassination attempt and carrying 9 stone 12 pounds weight.[293] Phar Lap sailed for the United States in 1931, going on to win North America's richest race, the Agua Caliente Handicap 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.[294] The 1938 British Empire Games 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).