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Australia: 1919 Professor Greg Kennedy
WAR CHANGES EVERYTHING. THAT is why sensible people try to avoid it if they can. Once the uncontrolled and unknowable forces of war are let loose, no one can predict the outcome. That applies to the winners as well as the
losers in such contests. Although a member of the victorious Allied war effort that saw off the attempt by the Kaiser’s Germany and the Austro- Hungarian Empire and the Turkish Empire to re- arrange the map of Europe, it was far from clear what it was that Australia had won in 1919.
In September 1918 Australia began to quarantine ships arriving from Europe in an attempt to prevent pneumonic influenza (Spanish Flu) from infecting the general population. Returning soldiers were a large part of the reason for the massive global pandemic eventually killing over 50 million people. Australia was as vulnerable as any nation to this deadly unforeseen consequence of war. By January 1919 influenza was spreading throughout the towns and cities, eventually infecting 1.5 million Australians and devastating communities, especially in densely populated urban areas such as Sydney. By the time the influenza epidemic had run its course over 40% of the population had fallen ill and 15,000 Australians had died. It was a tragic final act of sacrifice by the young nation caught up in the struggles of the Great Powers.
Economically the war left Australia an indebted nation with a vulnerable resource-based economy. The
direct cost of the war totalled £377 million with a peak expenditure of 20% of GDP coming in the final year of the war. This level of debt was an enormous change to the economic condition of Australia especially when compared to the last pre-war year, 1913-1914 when the state’s revenue was £21.7 million and government spending was only £15.5 million. In order to pay for the war effort Australia had decided in 1914 to do so by printing money and borrowing rather than raising taxation. However, by 1919 the Commonwealth’s taxation revenue had doubled to over £32 million due to an increase in excise rates and the introduction of probate duties, entertainments tax, wartime profits
tax and of course, income tax. This new system
of taxation raised concerns about double taxation and put pressure on the federal government-state government relationship within the nation. Australia had answered Great Britain’s imperial call to arms,
but the people of Australia ended the war indebted and faced the spectre of continued high taxation as
a reality of their future economic condition. Post-war price rises, wage increases and tariff protection all combined to create an inflationary environment that would persist in dogging the Australian economy well into the 1920s, as would the overall loss in purchasing power of real wages created by the war’s unique impact on the workforce.
Overall the First World War was a devastating event for the Australian economy. By 1919 real aggregate gross domestic product had declined by over 10 percent and real incomes per capita had fallen by over 16 percent. Interest payments on the debt which had
accumulated to finance the war would haunt the new nation throughout the interwar period and exacerbate the effects that the 1929 global depression would have on Australia. More importantly, the need to focus on natural resources, agriculture and other primary products to maintain economic stability meant that Australia’s post-war economy was more dependent on the export of those commodities to the exhausted British economic system than even before 1914. This reality of 1919, a close economic
dependence on Great Britain for fiscal revival, would again result in Australia being extremely vulnerable
to falls in commodity prices, a fact demonstrated by the nation’s early fall into depression and a severe economic downturn in the late 1920s that would have long-lasting effects. Tied to this was a critical reliance on British shipping, which was much reduced by 1919, to support that trade relationship. Overall, the economic price paid by Australia was the creation of a greater economic vulnerability due to the increased reliance on Great Britain, rather than great autonomy and freedom of action, for future economic prosperity.
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Overall the First
World War was a devastating event
for the Australian economy. ◆◆◆