Australian History: The Great Depression
wall street crash of 1929 with its
worst level at 1932 before recovering
The Great Depression was an economic catastrophe that caused a decline in international trade, personal income, tax revenue, prices and profits. Basically there was no money circulating within the population and therefore no one could buy anything, which meant no businesses made money and therefore no jobs were available in a catastrophic cycle. The day it began was October 29, 1929, known as Black Tuesday, when the Wall Street stock market in New York, USA crashed. A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market. These dramatic declines may be attributed to over-valuations of current stocks or investor panic and anxiety that may arise from social and political events. In the case of the Great Depression the cause of the crash is still debatable and many theories have been discussed. However a common consensus is that there was a large scale lack of confidence that caused panic which further caused a deflationary effect on prices and income.
For Australia, the Great Depression caused commodity prices to fall, unemployment to rise and Australia's big cities were depopulated as thousands of unemployed men took to the countryside in search of agricultural work. At the same time Australia had a lot of foreign debt due to infrastructure projects during the 1920s and the lack of economic activity caused a massive reduction in the tax revenue collections. Australia was in risk of defaulting on its foreign debt. This prompted the Bank of England to send an envoy, Sir Otto Niemeyer, to Melbourne to persuade the Australian Government to slash government spending, cancel public works, cut public service salaries and decrease welfare benefits which became known as the "Melbourne Agreement".
Unemployed men receiving food handouts.
Australia recovered from the Great Depression much slower than other developed countries. This has been attributed to Prime Minister Lyons’ conservative and cautious approach where no formal plan for economic recovery such as banking reform or socialisation of the economy were implemented unlike the US, UK and New Zealand. However the recovery saw the unemployment rate drop from a peak of 29% in 1932 to 10% in 1939 and industrial output had increased once again.