Save or spend

Document Sample
Save or spend Powered By Docstoc
					Save or spend?

              By 1930, around 19% of Australians were jobless and the number was
              rapidly increasing. Australia also owed millions of pounds overseas and
              those debts had to be repaid. Most of the proposed solutions to this
              economic crisis fell into two categories. The first solution involved
              cutting Government spending and therefore saving money, which was
              known as the deflationary approach. The second solution was to attempt
              to stimulate the economy by spending money, known as the inflationary
              approach.

              In this lesson, you start investigating a variety of schemes that were
              proposed to ease Australia’s economic woes, focusing on two such ideas.
              Firstly, the Niemeyer Plan, which advocated a drastic reduction in
              spending and the paying off of debts, and secondly, the Lang Plan, that
              was more concerned with the welfare of the unemployed than cost-
              cutting.




              What needed to be done?
              In terms of timing, probably no Australian Prime Minister was more
              unlucky that James Scullin. His Labor Government was elected to power
              only a few weeks before the New York stock market crash of October
              1929 and the ensuing Depression. Scullin realised that severe measures
              had to be taken to try to fix Australia’s worsening economic problems.

              Early in 1930, the Federal Government decided to increase the efforts it
              was making to stop Australians from buying imported goods. The tariff
              on imports was pushed up to almost 50%, making most imported
              products much more expensive to buy.

              For example, a man’s suit made overseas may have cost £4
              (approximately $8). With the additional 50% tariff on the imported suit it
              would now cost £6 ($12) to buy. A similar Australian-made suit may
              have cost £5 ($10). As a result of the tariff, the Australian-made suit is
              cheaper to buy. When a local business benefits from this sale, it can
              expand and offer more jobs.




Part 3   Fixing the problem                                                                13
     Generally, there seemed to be three possible solutions to Australia’s
     economic problems. These were to:

     1        continue spending more than was being earned

     2        default on the overseas loans and instead use the money to
              help the unemployed

     3        cut back on spending but continue to pay the interest on
              overseas loans.


     Activity 4
     Answer the multiple-choice questions based on what you have learnt so
     far. Choose the most correct answer and colour in the circle for that
     answer.

     1   A tariff is:

          a     a tax on goods made overseas                                   H
          b     designed to make the Australian product cheaper                H
          c     designed to make the foreign product more expensive            H
          d     all of the above.                                              H

     2   If an imported gas stove originally cost £8 without any tariff, the
         new price including the 50% tariff would be:

          a     £4                                                             H
          b     £8                                                             H
          c     £12                                                            H
          d     £16.                                                           H

     3   The economic solution that involved saving money (from the three
         solutions mentioned above) was:

          a     solution 1                                                     H
          b     solution 2                                                     H
          c     solution 3                                                     H
          d     none of the above.                                             H




14                                                             Australia Between the Wars
              Check your responses by going to the suggested answers section.



              The Federal Government chose the third option after receiving advice
              from Britain.




              The Niemeyer Plan
              Another action that Prime Minister Scullin took was to turn to the Mother
              Country. Specifically he asked the Bank of England to send a
              representative to Australia to help the government find ways that might
              improve their economic position.

              The Bank’s choice was Sir Otto Niemeyer. Sir Otto visited Australia
              between July and August 1930. He met with the state premiers in
              Melbourne and after examining Australia’s financial problems he
              declared that, ‘in recent years Australian standards have been pushed too
              high’.

              Niemeyer believed that Australia was living beyond its means and the
              government would need to make changes to be able to pay the interest
              on the loans owing to Great Britain. He suggested Australia should
              balance its budgets by reducing spending and cutting wages.

              The cartoon below illustrates an opinion of the effect that Sir Otto
              Niemeyer had on Australia in 1930.




              Source:   Macdougall A, Australia An Illustrated History, The Five Mile Press Pty Ltd,
                        Melbourne, 2004, p. 318.



Part 3   Fixing the problem                                                                            15
     In the cartoon, the ‘Bank of England’ is a reference to Sir Otto Niemeyer.


     Activity 5
     Answer the following question based on the cartoon.

     What is the cartoon saying about the impact of the Niemeyer Plan on
     Australia?

     __________________________________________________________

     __________________________________________________________


     Check your response by going to the suggested answers section.



     Niemeyer divided the population. Most of the financial sector and the
     wealthy thought his ideas were sound and thought his solution was the
     only way out of Australia’s economic woes.

     However the battling unemployed, who had the most to lose under his
     plan did not agree. They argued that the pain of the Depression was not
     being equally shared. Niemeyer’s arrogant and patronising attitudes
     towards Australia only added to his unpopularity with unskilled workers.



     The Melbourne Agreement
     The state Premiers all agreed that they needed to balance their
     budgets and to continue to pay the interest owing on the British debt.
     By signing the ‘Melbourne Agreement’, the state Premiers agreed
     they wouldn’t borrow any further money from overseas until their
     current loans were paid back. They also agreed to halt their spending
     on public works and promised that they would balance their budgets.




16                                                            Australia Between the Wars
              Activity 6
              Answer the following questions.

              1    With which of the three solutions on page 14 did Sir Otto Niemeyer
                   agree?

                    _______________________________________________________

              2    How do you think the workforce would have been affected when
                   governments stopped spending on public works?

                    _______________________________________________________

                    _______________________________________________________

              3    To what extent did the Melbourne Agreement support Sir Otto
                   Niemeyer’s advice?

                    _______________________________________________________

                    _______________________________________________________


              Check your responses by going to the suggested answers section.



              The situation only got worse for workers. In January 1931, the
              Commonwealth Arbitration Court ordered that the basic wage be cut by
              ten per cent, in accordance with the Melbourne Agreement.




              Jack Lang
              Shortly after the Premiers’ meeting in Melbourne, state elections
              were held in NSW. The Labor candidate, J. T. Lang, campaigned on
              the basis that he was opposed to the Melbourne Agreement which had
              been signed by the current Premier, Thomas Bavin.

              Labor convincingly won the election and Jack Lang became NSW
              Premier. He had previously held this position from 1925 to 1927.




Part 3   Fixing the problem                                                             17
     Premier Lang was an imposing figure. He was 189 centimetres tall with
     broad shoulders and a prominent jaw. His appearance, forceful manner
     and great skill in public speaking made him a powerful figure.

     Lang was also determined to help the growing number of homeless and
     unemployed. Immediately upon coming to power, he introduced the
     following measures:

     •      restoration of the 44-hour working week (although Lang
            had first introduced this in 1925, the working week had been
            increased to 48 hours by the Bavin government)

     •      an anti-eviction law (before this law was introduced, landlords
            were able to take all the belongings of a tenant who had fallen
            behind in the rent and sell them to pay the overdue rent)

     •      Moratorium Act (this extended by three years the time people had
            been given to pay mortgages and hire-purchase agreements.

     When Lang took over as NSW Premier, he discovered that the state owed
     over £8 million. London banks demanded that the interest on these loans
     be paid. Lang refused. He believed it was more important to use the
     money to help the unemployed people in New South Wales.

     He also thought that British demands for the repayment of loans were
     unfair, given Australia’s commitment in World War I. He argued that
     Australia’s war debt had been accumulated while Australians were
     defending Britain on foreign soil. He added that 60,000 Australians had
     given their lives for this cause.

     He looked at new ways of helping the people. A State Lotteries Act
     was passed to raise funds for public hospitals. Lang also increased
     the taxes on working people. He used this money to provide work
     for the unemployed.

     On the following page you can check what you’ve learnt about Jack
     Lang.




18                                                           Australia Between the Wars
              Activity 7
              Write ‘true’ or ‘false’ in response to these statements on the beliefs and
              actions of Premier Lang.


              1      Jack Lang disagreed with Sir Otto Niemeyer.                _________

              2      Jack Lang supported the jobless.                           _________

              3      Jack Lang supported people who were evicted.               _________

              4      Jack Lang decreased everyone’s taxes to ease               _________
                     their financial burden.

              5      Jack Lang believed that Australia deserved some            _________
                     consideration from Britain due to Australia’s war
                     effort.



              Check your responses by going to the suggested answers section.



              Nevertheless, further demands were placed on Lang to pay the overdue
              interest at the Premiers’ Conference held in Canberra.




              The Premiers’ Conference
              At the Premiers’ Conference held in February 1931, the
              Commonwealth Government asked the states to revise their aged
              and invalid pensions and child endowment payments. They
              believed that the governments would be able to save money by reducing
              these social services. It was also suggested that wages be cut further.

              Lang disagreed with these suggestions. Instead he proposed his own
              plan for improving the country’s finances, or at least the finances of
              NSW, the state he governed.




Part 3   Fixing the problem                                                                 19
     The Lang Plan
     There were three main points to Lang’s plan to save money to use
     for social services and unemployment relief.

     1      The governments of Australia were to pay no further interest
            to the British investors until the terms of the loan were
            changed. Lang wanted the interest rate dropped from 5% to
            3% and the repayments spread over 62 years. Also, all war
            debts owed to Britain were to be suspended for three years.

     2      In Australia all government borrowings were to be reduced
            to 3%. This would provide more savings than reducing
            wages would.

     3      Australia should abandon the gold standard of currency in
            favour of a goods standard.

     In ‘The way out’, you learn about other proposals to reduce the impact of
     the Depression in Australia. You also identify the reasons for Australia’s
     slow return to economic good fortune.


     Go to the exercises section and complete Exercises 3.3 to 3.5 as directed
     by your teacher.




20                                                            Australia Between the Wars

				
DOCUMENT INFO
Shared By:
Categories:
Tags: Save, spend
Stats:
views:48
posted:4/4/2010
language:English
pages:8
Description: Save or spend