the australian war economy, may-october, 1944

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  • THE AUSTRALIAN WAR ECONOMY, MAY-0 CTO B E R, 1944

    I. Introduction. 11. Production and Supply Problems.

    111. Finance and Prices. IV. Planning for the Post-war Period.

    I The period since the last review of the Australian war

    economy (see Ecommic Record, June, 1944) has been marked by one outstanding event, the referendum on the Constitution Alteration (Post-war Reconstruction) Bill, and the persistence of a number of harassing economic problems. The rejection of the Powers Bill, as it was generally called, was a serious setback to the Commonwealth Government, particularly after its over- whelming success a t the general elections just a year before. This is not the place to discuss the reasons for this rebuff from the electorate, but merely to note the effects of this decision so fa r as it will affect the Commonwealth's power to carry out economic reconstruction after the war, and to bring about a smooth and orderly transition from war to peace. Even the Leader of the Opposition, Mr. Menzies, agreed that some transfer of powers from the States to the Commonwealth was desirable, but he claimed that his opposition to the bill was because of the nature and extent of the powers asked for. He admitted Ihat i t would be necessary for the Commonwealth to have power in the years immediately after the war to continue control of prices, investment, essential materials, and rationing, but held that there was sufficient power under the National Security Act to do this. One may be excused, however, for thinking that. these powel's are doubtful and inadequate. The problem of effective coutrc! :n the post-war period, therefore, still remains to be solved. Theoretically it can be done by agreement between the States and the Commonwealth; but it would be unwise to rely on that possibility. A better way, which may be more feasible, is that the Federal Government and the Opposition leaders should draw up an agreed minimum of powers which the Commonwealth ought to have, to embody them in a bill, and then seek the approval of the electors a t another referendum.

    So fa r as the Australian economy is concerned, for a t least eighteen months it has probably been making its maximum contribution to the war effort, with the labour and material resources a t its diq)osal. With price stabilization since April,

    D 189

  • 190 THE ECONOMIC RECORD DEC.

    1943, and a labour force growing only very slowly, national income has remained fairly steady over the last twelve months. The problem has been to maintain an adequate volume of production for the needs of the services and the civilian population. The wholesale call-up of men of military age that took place during 1942 and 1943 seriously impaired the productive capacity even of essential industries, and made it extremely d s c u l t to maintain the previous level of output. The recruitment of women for the auxiliary services added to this difliculty. Accordingly it became necessar; once the danger of invasion was past, to remedy the balance between those in the services and those in essential industry. The transfer of 20,000 men from the army to the economic front, begun in October, 1943, was completed according t o plan by 30th June, 1944, so Mr. Forde stated on 24th July last. Meanwhile, the tide of war moved further away from Australia, RS the American command began to bring overwhelming numerical forces and material into action against the Japanese in the South-West Pacific. It became ever clearer that Australia could best help in this campaign by increasing her supplies for the mainten- ance of the United Nations forces in this area, even if this should entail some diminution of the number of men in her armed services. This conclusion was strengthened by the pro- gress of the European war, and the accumulating evidence that Germany will be defeated by 1945. On his return from Britain and America, Mr. Curtin said in the course of his speech to Parliament on 17th July last, Mi. Churchill discussed the part to be played by British forces in the ultimate defeat of Japan. Though the transfer of the main British effort must await the defeat of Germany, large and powerful forces will become available this year, and the planning of the British effort is being vigorously pursued. In so far as these British forces will also look to Australia as a base and source of supplies, it became evident that me must bend every effort to increase our productive capacity, while maintaining the greatest military effort compatible with this r6le of supplier, particularly of foodstufEs. So it was no surprise when the Prime Minister announced to Parliament on 30th August that the Government had decided to release 30,000 men from the Army and 15,000 men from the Air Force by 30th June, 1945.

    I n spite of Army releases, and in spite of the relaxation of some import controls, problems of production and supply have continued to worry the authorities. The coal industry has con-

  • 1944 THE AUSTRALIAN WAR ECONOMY 191

    tinued to be the chief cause of anxiety, and food production has probably been the second most important source of concern. In the coal industry strikes and absenteeism .have been the main causes of failure to obtain the output desired, while in food production adverse weather conditions over almost the whole of southern Australia have been mainly responsible. In attempts to meet our export commitments to Britain, a reduction has been made in the butter ration. But despite this, and the introduction of meat rationing at the beginning of the year, it seems likely that we will not be able to send to Britain the amount of food we hoped to export in 1944. We seem, in fact, to have entered upon a rather dificult phase of our war effort. On the one hand the removal of the immediate danger of a Japanese invasion has caused a sense of relief, some relaxation of controls, and the lifting of the depressing lighting restric- tions. But it has done little or nothing to relieve the shortage of supplies, and there have been further restrictions of trans- port, while the housing shortage remains very acute. The working population is tired, and feeling the strain. Also, most people probably feel that now the war is going well, civilian conditions should be easier, and many are less willing to work overtime and forego holidays. It was easier to endure sacrifice when a Japanese invasion was imminent. Now the war effort has entered a steady slogging phase; it is difficult to maintain our energy for the required effort. Yet a steady, and even an

    I increased production is required, if we are to finish the war as soon as possible. It is not surprising that the Prime Minister, harassed by these problems, has suffered a breakdown in health, and, a t the beginning of November, was ordered a months rest. Several of his colleagues have also been feeling the strain, and the rest of the population in varying degrees.

    I1 (a) Manpower. Continual efforts have been made to re-allot

    the countrys labour resources so as to obtain the best result for the prosecution of the war. On 4th May the Minister for the Army stated that during the six months ended 3ht March, 1944, some 44,000 discharges were made from the forces. These includd discharges for normal wastage as well as special releases to industry. . . . The numbers employed in the munitions and aircraft bloc were reduced by about 12,000 from September, 1943, to March, 1944. Over the same period, the strength of the Allied Works Council was reduced by 12,500.

  • 192 THE ECONOMIC RECORD DEC.

    But in spite of this diversion of labour, the shortage throughout industry has remained acute. For a brief period at the end of May, 1 9 4 , the Commonwealths power to direct persons to work for private employers was called in question by a decision of the Supreme Court of New South Wales on 25th May. But on appeal the High Court of Australia unanimously upheld the valid5ty of the disputed regulation on 8th June, 1944. The danger that to a labour shortage would be added lack of control over the existing labour resources was thus averted.

    Upon the return of Mr. Curtin on 26th June from his visits to Washington and London, the situation was examined again in the light of decisions reached with the American and British Governments. The Prime Minister announced in Parlia- ment on 30th August that agreement was reached as to the lines our effort should take in the shape of fighting forces, the economic basis of the direct military effort, and the contribution to be made tovards the maintenance of forces in the Pacific and the provision of food f o r Britain. The total demands for labour for high priority work was estimated at 96,000 men and women, but since all these demands could not be met, tlicy were scaled down to an absolute minimum of 52,000. Since the Government estimated that not more than 13,000 of these could be obtained by natural increase and diversion of the labour force, it decided to release 30,000 men from the Army and 15,000 men from the Royal Australian Air Force by 30th June, 1945. On 24th October, Nr. Funnell, who has succeeded Mr. Wurth as Director-General of Manpower, announced that planned programmes mould require a minimum of 155,000 men and 37,700 women up to 30th June, 1945. It was estimated only 117,000 men and 26,000 women were available from the various sources, leaving a total deficiency of about 50,000. Mr. Forde announced the following day that the situation mould be reviewed again before the end of the year.

    (b) Coal Procluctwm. Perhaps more serious than the general shortage of labour has been the difficulty of maintaining a sufficient output of coal. By virtue of its powers under the Coal Production (War-time) Act, the Commonwealth Govern- ment has brought t w o collieries under the control of t

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