Australia and New Zealand, Great Depression in

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AUSTRALIA AND NEW ZEALAND, GREAT DEPRESSION IN

The Great Depression began in Australia and New Zealand with a collapse in demand for their primary products, which caused export prices to fall 40 percent from 1929 to 1932. The loss of earnings caused a severe liquidity crisis from mid-1929 in two countries that relied heavily on foreign borrowing to finance economic development, while disequilibrium in the balance of payments forced a reduction of imports in 1930 to half their pre-Depression level. The gross domestic product, measured in constant prices, fell by nearly 10 percent between 1929 and 1932 in Australia and 20 percent in New Zealand.

Both countries had enjoyed prosperity as enterprising and progressive colonies of British settlement. The United Kingdom was the principal market for Australian wheat, wool, and agricultural products, as well as for New Zealand meat, wool, and dairy products; these rural exports accounted for over 20 percent of their nations' production. Yet both countries were highly urbanized: The majority of wage earners lived in the four principal cities of New Zealand, while Sydney and Melbourne both had more than one million inhabitants. Australia, with a population of 6.5 million in 1930 (when the New Zealand population was 1.7 million) was the more ambitious in promotion of secondary industry by tariff protection and government assistance. Both sought to guarantee living standards through national tribunals that determined minimum wage levels.

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A Labor government took office in Australia at the onset of the Depression and responded to the crisis by encouraging greater production of rural exports and raising tariff levels to reduce imports. But the serious deterioration in the balance of payments caused difficulties in servicing the foreign debt, and the Bank of England sent Sir Otto Niemeyer to advise on appropriate remedies. With the support of the Australian banks, he made the federal and state governments agree to reduce expenditures, balance their budgets, and curtail borrowing. The Arbitration Court cut the minimum wage by 10 percent in January 1931, and the Australian currency was simultaneously devalued against sterling by 30 percent. The federal Labor government suffered defections and lost office at the end of 1931 to a reconstituted United Australia Party, which maintained the retrenchments. The Labor premier of New South Wales, Jack Lang, who defied the financial arrangements, was dismissed from office in 1932.

In New Zealand, two non-Labor parties with rural and urban bases of support, the United and the Reform parties, dominated the parliament and came together in a coalition in 1931, leaving Labor in opposition. The government followed deflationary policies similar to those in Australia, though New Zealand resisted devaluation until January 1933, when a 25 percent cut in the exchange rate with sterling was made. The New Zealand Court of Arbitration imposed a 10 percent wage cut in May 1931.

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Recovery began in Australia and New Zealand by 1933, assisted by the increase in the volume of exports. The Ottawa Agreement of 1932, which gave preferential trade arrangements to the British Dominions, probably assisted Australian and New Zealand producers. Their Depression was less severe than in the United States. Estimates of unemployment vary, ranging from 20 to more than 30 percent of the workforce in Australia; the New Zealand economy had a smaller proportion of employees, so its rate of unemployment was lower. There was less work rationing than in the United States and a high incidence of long-term unemployment. Relief measures in Australia were initially in the hands of local government and charities, and took the form of food handouts. From 1930 state governments levied emergency income taxes to finance sustenance payments and enlist unemployed men in public works. The New Zealand government followed similar policies, with a strong emphasis on working for the "dole."

These measures were barely sufficient. Eviction and homelessness became common. Shanty towns sprang up on the outskirts of cities, while many un-employed resorted to an itinerant existence in the rural interiors. Protest demonstrations erupted occasionally into violent city riots in 1931 and 1932, and encouraged governments to provide public works. The requirement that married men work for the dole on such projects, often far from home, imposed strains on marriages, and younger men were especially vulnerable to the social dislocation of prolonged hardship. Marriages were deferred, and the birthrate fell to an unprecedented low. Those indigenous peoples of the two countries, the Aboriginals and Maori, who were in the paid workforce were mostly rural, casual workers, and were hit hard. There were some cases of antagonism to foreign workers, mostly southern Europeans employed in mining and agriculture, though the cessation of migration during the Depression defused such animosities. In societies that had valorized the male breadwinner, there was also criticism of the displacement of men by female workers, but the trade unions were powerless to prevent such changes in employment policy.

Several regional studies of the Depression suggest that the unequal sacrifices it imposed on different classes strained social cohesion and dented the egalitarian ethos of these new-world nations. Oral history and fictional treatments attest to the humiliations the Depression inflicted as well as the resourcefulness of its victims. The failure of the Australian Labor Party allowed the previously ineffective Communist Party to channel discontent into its Unemployed Workers Movement. Communism and the defiant radical populism of the premier of New South Wales alarmed conservatives, who formed secret armies to defend God, king, and empire. That was unnecessary in New Zealand, where the Labour Party first gained office in 1935. Its extensive program of economic management and social welfare was heavily influenced by the lessons of the Depression.