the economic record:june, 1944 : the australian war economy, november 1943-may 1944

THE

THE

ECONOMIC RECORD JUNE, 2944

AUSTRALIAN WAR ECONOMY, NOVEMBER 1943-MAY 1944

I. Introduction. 11. Production Problems.

111. Finance and Prices. IV. Present and Future Policy.

I Those responsible for the shaping of the Australian

economy during the past six months have had to deal with quite a H e r e n t kind of problem from that which had to be faced two years ago, when this country was under threat of invasion from the Japanese. The problem then was to call up every possible man for military service, and to transfer those indispensable to industry to munitions production to the greatest extent possible, or to a works programme for defence purposes. This job was on the whole done effectively, and it would be hard to deny that the wartime governmental departments such as War Organiza- tion of Industry, Supply and Shipping, Labour and National Service, the Prices Commission, the Rationing Commission, the finpower Directorate, the Allied Works Council, and many others greatly helped in bringing about a fairly rapid transfer of labour and resources. During the past twelve months, however, the nature of the problem to be tackled by those shaping the Australian economy has radically changed. The extent and the effectiveness of American aid in the South-West Pacific, and the success of our own munitions programme, have vastly altered the situation. The threat of Japanese invasion haa bezn removed ; the war is now being carried into the enemy’s territory. But while our Australian troops are still engaged in breaking the Japanese grip on the coastal areas of the mainland of New Guinea, the balls of the forces and equipment being used in the South-West. Pac& is now American. It is common knowledge that only a relatively small proportion of our military forces are now actively engaged in this area. This fact, together with the passing of the menace of invasion, has led to some relaxation A

2 THE ECONOMIC RECORD J U N E

of the pressure to recruit every possible man for the army. On the other hand, the increasing demands upon the Australian economy to feed and supply the Allied forces in the South-West Pacac area have caused acute problems of labour shortage in many fields bf production. This situation has been accentuated by the continued demands made upon our export proauction by Britain, as she bends her resources and manpower to the task of invading Europe. The increasing extent of what is often called ‘ ‘reverse lend-lease” indicates how we have shouldered our obliga- tions towards our Allies ; at the same time we have tried to maintain the flow of foodstfls to Britain without diminution. The attempt to meet these demands in addition to our own internal needs has encountered difficulties a t several points, and has called for continuous redirection of manpower and resources. Twelve months ago munitions production had become more than sufficient to meet all needs for the various types we were pro- ducing; the redirection of skilled industrial workers into ship- building and repairing, and to the making of agricultural machinery and spare parts then began. The main problems in the last year have been problems of labour shortage, of increasing the production of food stuffs, coal, and supplies other than munitions for the forces. Problems of prices and price-control have been encountered but the policy with regard to price-stabilization has been settled, and its application appears to have been generally accepted. The financing of the war has been achieved to an increasing extent by taxation and loans, and the “gap” filled by central bank credit has been narrowed. The Australian economy is fully geared for war purposes; we can now do little to increase the employed population, but we are continudy obliged to make adjustments in the nature of their employment. There have been further extensions of rationing, and further measmres of control in the coal industry; they have been accompanied by a certain amount of tension in coal-mining, and in the dairying industry, but nevertheless these adjustments go on. At the same time an increasing amount of thought has been given to post-war problems and planning. It is encouraging to note that we have reached the stage where victory now seems to be within measurable distance, and plans for the transition to peace are being discussed. The Summer School of the Institute of Political Science held a t Canberra a t the end of January last was symbolic of this tendency; at that meeting a number of those responsible for shaping policy were able to expound plans and ideas about post-war reconstruction in Australia.

3 1944 THE AUSTRALIAN WAR ECONOMY

I1 The main difficulty underlying nearly all

production problems during the past year has been shortage of labour. Although, as pointecl out earlier, the necessity to call up every possible man for military service has passed, yet the need for maintaining fighting forces a t the maximum effective strength remains. The Prime Ministefi stressed this fact in his review of the war situation in Parliament on 9th February: “the scale oE Australia’s military effort will have an important bearing on our status at the peace table. It is of vital importance to our future that the part we play shall be such as to guarantee us an effective voice in the peace settlement. There is, therefore, a minimum below which our military effort cannot be permitted to fall.” Moreover, the Prime Minister has pointed out on several occasions that the labour shortage in various industries cannot be solved simply by resort to the formula: “Take them from the Army. ” Nevertheless the decision taken last October that 20,000 men would be released from the Army by the end of June, 1944, is being steadily carried out. It is intended that a t least 15,000 of these men shall be released‘ for farm production; in addition, 2,000 to 3,000 men are being discharged from the forces each month as a result of injury and incapacity. Some o€ these are being employed in rural industry. In addition, the diversion over the same period of 20,000 workers from the munitions and aircraft establishments to other high priority work has also been proceeding. New workers coming into industry for the first time provide the only other important source of labour to overcome shortages, and these amount to little over 2,000 a month. In spite of Army releases, of diversion of munition workers, and new recruitments, labour shortages have been one of the chief causes of tension and of production daculties in the Australian economy for some time past. These tensions have been most obvious in the coal mining and dairying industries, and these industries call for particular notice.

(b) Cod Production. The shortage of coal has been probably the chief source of anxiety to the Australian government and public during the last twelve months. The seriousness of this obliged the Federal Government to review the position in October last, and led the Prime Minister to address some blunt remarks to the coal miners. He has repeated these blunt remarks on several occasions since, and has also spoken in similar frank terms to the coal owners. This plain speaking has, moreover, been fol-

(a) Manpower.

4 THE ECONOMIC RECORD JUNE

lowed by action on the part of the Government, which has sought sincerely and energetically to find ways of increasing the output of coal. The Government has rejected the view that a solution could be found in nationalization, as some of its supporters urged. The Prime Minister has plainly stated that he does not believe that nationalization would bring a b u t any increase in production. On the other hand, he also rejected with equal firmness the idea that more coal would be produced by sending striking miners to gaol, or by prosecuting them with the utmost rigour of the law, or by putting them in uniform. However, to meet the situation of dwindling coal reserves, the Government in October held conferences with representatives both of the miners and of the coal owners. The Coal Commissioner was also present at these conferences, and all suggestions to increase production were carefully considered. Earlier in the month the Commonwesltll Government had taken steps to secure an economy of 40,OOO tons of coal per week, the saving to be effected by fuel economies, and by a cut in consumption by railways, gas and electricity under- takings, and industrial users. The cuts in transport services then mad’e were further increased in May, 1944. In spite of these measures the position improved little, and on the 23rd February, the Prime Minister introduced the Coal Production (Wartime) Bill to give power to the Coal Commissioner to take over any mine in order to maintain or increase production. Al- ready these powers have made use of .and it is probable that they have been helpful in maintaining production. The Coal Com- mission has &o been active in taking other measures to increase production: two new mines have been opened in Western AUS- tralia, expansion of capacity has been assisted in Tasmania, Vic- toria and Queensland, and help has been given to the South Aus- t r h Government to develop opencut mining of the h i g h Creek deposita of brown coal. But despite these measures Aus- tralia still depends on New South Wales for about 80 per cent. of its coal, and, as the Prime Minister said in introducing the Coal Production Bill, the present diiliculty is due ‘‘to the all too frequent interruptions to production at the New South wales mines. ” These mines have a present productive capacity of at least 13-5m. tons, but their production in 19& was just under 11.5m. tons; the loss attributed to strikes was 1-3m. tons, and to absenteeism 1 . h . tons. Nevertheless it should be re- corded that the total output mined in Australia in 1943 was somewhat better than was anticipated in October last, reaching 14,164,OOO tons, a greater production than for any year except

1944 THE AUSTRALIAN WAR ECONOMY 5

1942. But it is disappointing for a government, which has done everything possible to meet the reasonable demands of the miners, to fall short of the production of 16,000,000 tons, which the Prime Minister declaxes is the amount required if this country is to develop its maximum waz potential. We may hope that the output for 1944 will reach this figure, but seeing the reaction of thd miners in some localities against the reduced butter ration, it would be unwise to expect such an improvement.

(c) Food Productwn. In the field of food production the difficulties have not been of the same character, but they have been due mainly to two factors-labour shortage and unfavour- able seasons. Very little can be done about the latter cause, but action has been taken to remedy the shortage of rural manpower. It has been admitted by the Government that farm workers were recruited rather too readily into the forces during the early years of the war, and since October last an appreciable effort has been made to recover some of these farm workers, particularly for the dairying industry. These releases have been proceeding as intended, but they do not constitute anything like a wholesale recall of farm labour. The practice is that farmers nominate persons in the forces to be released; but the release only follows if the person nominated consents, if manpower ap- proves the branch of production he is to enter, and if the Army agrees to his relea-which it will not do if he is Class "A" in an operational area. Individual farmers have often, therefore, been clisappointed in their attempts to s e c w the release of mem- bers of their family, or particular farm workers. They have often been made more disgruntled by the inadequate supply of inetllcient farm workers who have been available. Dairying has probably suf€ered more than any other branch of farming, and it is in dairy products that the chief failure to achieve produe- tion goals has occurred. Harassed by shortage of labour, of fer- tilisers, of machinery and spare parts, the dairy famers in southern Australia have also had to d e r the added exaspera- tion of an exceedingly dry summer and disastrous bush*es. As a result, in New South Wales and Victoria they came to nourish something of a pmecution complex akin to that of the coal- mining community, and to talk of strikes in demanding increased prices for milk and dairy produce. The Commonwealth Govern- ment and the Prices Commissioner have, however, steadfastly refused to agree to any large-scale departures from the policy of price stabilization; they have agreed, however, to increase the subsidy to the industry since its difficulties are real and serious.


But the Government has also taken other steps as well to help dairy farmers. Munition works are fulfilling orders for agricultural machinery, for milking machine parts, for some 5,000 small engines for milking machines and sprays, while other supplies are being obtained by import and through Lend-Lease. The new subsidy to the dairy industry announced in April pro- vides for a basic subsidy of 34d. per lb. of butter all the year and a special seasonal subsidy of 2d. per lb. on half the output produced in the non-flush months, approximately eight months. This is designed to encourage better feeding of cows and to step up production. In support of this the Government announced a t the same time guaranteed prices to producers for certain stock feeds (oats, barley, maize and sorghum) and it is making these products available to dairy farmers a t subsidized prices. The Government recognizes that increased fodder supply is an essential condition of stepping up production of dairy products. It might be hoped that through these measures, and the release of rural labour, dairy production will show a definite improvement. But weather always comes into the picture; the breaking of dry conditions in the southern states since March has been offset by a prolonged dry spell in the dhirying districts of Queensland.

In point of fact the story of dairy products is considerably different from that of cod. Production was maintained in 1943- 44, and even increased over that of the two preceding years, but the demand from the services for processed milk increased enor- mously. It was pointed out by Mr. Curtin in his review of the situation on 21st December last that “the production of con- densed milk, concentrated milk and powdered milk for war needs . . . . has more than doubled.’’ While the demand for dairy products from the Allied forces in the Pacific area has kept increasing, our export commitments to Great Britain have continued unchanged, SO that egg shortages and a t least a tem- porary reduction of the butter ration have been the result. We cannot avoid the present shortages, but if the measures that have been taken are accompanied by favourable seasons in 1944-45 we may.meet all commitments and maintain our ration scales.

In other fields of food production the picture varies. Mr. Curtin stated in December that on existing consumption scales the total demands for meat in 1944 would amount to the record figure of 1,344+000 tons. Pre-war production had been 963,000 tons of which 243,000 were exported. It was not expected that production in 1944 would exceed l,OOO,OOO tons. Consequently meat rationing was introduced in January, 1944, in order to


bring about a reduction of 20 per cent. in civilian demand for meat. This would not avoid the necessity of reducing the amount made available to the forces and for export, but it was hoped to maintain the export of meat to Britain. However, i t is quite clear that so far as meat production is concerned there has been no fall in output compared with pre-war production; demands upon output, however, have increased in unprecedented fashion. On the other hand, in the field of vegetable production there has been very gratifying success in expanding production. Mr. ScuUy, the Minister for Commerce and A,oliculture, stated in December last that the peace time area under vegetables was 254,000 acres. This had been increased to 350,000 acres in 1943, and to about 500,000 acres in 1944, from which was expected more than 1,000,000 tons of vegetables. This great expansion has been made possible by a large-scale application of mechanical methods to vegetable production. Much equipment was obtained from the United States, while local manufacturers have also begun making rotary hoes and spare parts, as well as ten different types of new specialized machinery for vegetable crops. In this field there has certainly been no decline in production, which has probably been doubled. But the increased supply has gone almost entirely to our own and Allied forces, to a large extent in the canned or dehydrated form. The picture of the food front is, therefore, a varying one ; it is not entirely satisfactory, but the difficulties are due largely to matters beyond our control. The responsible authorities have done a great deal to maintain a fair balance between the various claims on our food resources. They have also taken useful measures t o get a better distribution of labour and material resources between the various branches of production, and we may hope that these measures will bring supply somewhat closer to demand. But we must not expect that they will enable us to do without rationing of essential foodstuffs -except bread.

(d) Rationing. In rationing the chief developments have been the introduction of meat rationing in January, 1944, and the reduction in the butter ration from 8 ozs. to 6 ozs. per week in June, 1944, for a period of two months, the position to be reviewed at the end of July. Both measures have been made necessary in order to meet our export commitments and the increased services’ demand in Australia. There was some attempt by interested parties in Sydney to organize opposition to the introduction of meat rationing, but prompt action under the National Security Regulations for conspiring “to influence pub-

8 THE ECONOMIC -CORD JUNE

lic opinion in a manner likely to be prejudicial to the efl8cient prosecution of the war,” and for inciting certain persons “to absent themselves from their place of emplopment,” soon put 8

stop to these ill-advised activities. The rationing of meat has in fact worked quite smoothly in spite of a fairly complicated scheme, and the ration is certainly quite adequate. The announcement of the reduction of the butter ration for at least a p&od of two months was made a t the beginning of June. It was immediately followed by strikes at several coal mines in New South Wales as a protest against the reduction of the ration. However, the launching of the invasion of Europe on 5th June, 1944, seemed to bring about an immediate end of the strikes, and it is to be hoped that from now on New South Wales cod miners wi l l aecep* the new scale: with the same readiness as the rest of the community. On the whole, rationing has continued to work smoothly and well, and it has played an important part in conjunction with price control, in securing a fair distribution of production between civil needs, and our export and service commitments.

(e) Other Prodtation Problem. Shortages of production have not been confined to the fields already surveyed; in fact, the most acute shortages have not been in these fields of essential commodities. There have been acute shortages of many kinds of consumer goods, many non-essential but: some of a semi-essential character. It was to deal with this situation that in 1943 the Civilian Requirements Board was set up to advise the Production Executivq on “the level8 of production necessary to meet easen- tial civilian requirements and to see that available supplies were equally distributed.” Accordingly, in November, 1943, the Minister for War Organization of Industry announced the ap- proval of a plan to inmase! local production of cooking ~d eat- ing utenSiie, crockery and glassware, which had-been in short supply to civilians. Action had been taken previously to increase the supply and distribution of clothing. Mr. Dedman on 3rd December last said that “strains and stresses were becoming apparent over the whole field of civilian economy. . . . The aOv6rnment was cognisant of the facts and would continue to direct 8 balanced use of limited resources over the whole field of essential industry. An optimum war effort could be obtained only by the strict preservation ofl that balance.” It is only fair to say that this seems to be an m u r a t e statement of the prin- ciples upon which the Commonwealth Government has worked in dealing with production problems.


I11 (a) Price Control. At the end of November last the Prices

Commissioner reviewed the movement of retail prices in a number of countries, and showed that countries which had adopted the policy of price stabilization “ h d held their price levels a t or near the point a t which they had been stabilized. Other countries showed a persistent increase under war conditions.” New Zea- land, Canada, Great Britain and Australia had held their price- levels steady since the introduction of ceiling prices. In Aus- tralia the rise in the retail price level had been kept a t about 23-24 per cent. above prewar level, but in the United States and South Africa they were 24 and 25 per cent. above prewar levels and still rising. Noreover in India retail prices had doubled compared with prewar levels, and the price of some items such as clothing by May, 1943, was four times the pre-war figure. Against this Professor Copland was able to point to an actual fall in the Australian retail index in the September quairter of 1943, and to forecast confidently that there would be a still further reduction in the last quarter of the year.

The price stabilization policy has not been without its diB- culties. The holding down of prices, together with rationing, inevitably leaves considerable purchasing power in the hands of consumers, despite the heavy rates of taxation and the con- tinual raising of Commonwealth loans. A certain amount of tax evasion adds to the pressure of this surplus purchasing power, and leads to a certaixf amount of “black marketing.” The Com- monwealth Government and the controlling authorities are resolved, however, that “ black markets ” will not be allowed to jeopardiae the success of the price stabilization policy, and vigorous action has been taken by 05cers of the Prices Commission and of the Rationing Commission against “black market” practices. Both the Price0 Commissioner and the Attorney-General, Dr. Evatt, have had occasion, however, to complain of the fact that magistrates have been excessively lenient in their sentences on “black market” offenders. In fact some magistrates have gone so far as to denounce the methods used by investigation oficers to get evidence for prosecution of “black market” practices. It is difscult to u n d e w d this mentality which objects to criminals being exposed, but it will certainly not deter the authorities from making every effort to stamp out “black markets,” Mr. Curtin clearly stated in November last that “the Government wiU not be deterred from its obvious duty by mg- gesti0n.q that it is contrary to normal practices of detective work


to adopt the methods of the ‘black marketeer’ to combat his evil practices.” In order to do this more effectively Dr. Evatt on 29th February, 1944, announced that amendments had been made in the National Security Regulations to provide for more drastic penalties for price offences, including forfeiture Of licences, and of goods or money involved in the illegal trans- actions. Subsequently the successful prosecution of persons engaged in “black market’’ trading in liquor in Sydney has pro- vided a useful example of the Commonwealth’s determination to deal effectively with this nuisance.

Two major loans have been raised by the Commonwealth Government during the financial year 1943-41. The Fourth Liberty Loan was opened on 24th October, 1943, and closed on 16th November. The objective was €125&. and 750,000 subscribers ; the sum was obtained but the number of subscribers although a record was approximately 560,000. On 22nd Novem- ber the Prime Minister in commenting on the results remarked that our achievement had been compared with the raising of loans in Canada, somewhat to our disadvantage. The fact that in Canada larger amounts per head were raised in loans could be attributed to several factors. The Canadian Government used between 18,000 and 20,000 bond salesmen to sell war loans; the cost of raising the loan is 21/- to 22/- per cent., compared with the Australian cost of 3/6 to 5/- per cent. Moreover, these salesmen canvass the services, which is not done in Australia, while Canadian trading banks are allowed to subscribe to the loans and to finance customers’ su~criptions,-practices which are also forbidden in Australia. Finally incomes per head in Aus- tralia are not as high as in Canada, although the purchasing power of money is greater in Australia than in Canada.

The second loan was an even more ambitious undertaking. In the First Victory Loan launched on 29th March, the Com- monwdth asked for S15Om. and the loan was to close on 9th May. In point of fact it became necessary to extend the closing date of the loan for a week in order to fill the loan, which closed on 16th May. In addition to the E275m. raised by public loans, the Commonwealth Treasurer also estimates that another S25m. will come from the purchase of War Savings Certificates and Stamps. The objective of €3OOm. .for public borrowings set by Mr. Chifley in his budget speech of September, 1943, has been reached, and it is to be expected that this rate of public borrowing will be at least maintained. With price stabilization in force, and a condition of full employment, little further increase in

(b) Piname.


national income can be expected for the duration of the war. The volume of public borrowing may be expected therefore to increase but little. The “gap” in the budget of f100m. between receipts and expenditure can be reduced still further however by a more effective yield from taxation, and much attention has been directed over the last six months to checking evasion of taxation, and to improving the methods of income-tax collection. Mr. Chifley on 8th October, 1943, announced that on the 30th June previously there had been over €Nm. of Commonwealth tax revenue outstanding, but “a large proportion of the tax shown as outstanding on June 30th each year is not due and payable until some time later.” A few days later the Prime Minister acting on a suggestion from the Leader of the Opposition announced that an all-party committee would be appointed to examine “the pay as you earn” method of income tax collection. This committee was appointed on 2nd December, 1943, and pre- sented its report early in February, 1944. This report and its recommendations were adopted by the Government, and “the pay aa you earn” system of income-tax collection comes into operation with the financial year 1944-45. It involves no extra payment of tax by wage and salary earners, who will have paid 23 per cent. of the tax dud for the full year 1943-44 in the months from April to June, 1944; the balance is remitted: Non-em- ployee groupd likewise receive a remission of 75 per cent. o€ tax due 011 income for 1943-44, but they have not paid their 25 per cent. liability by instalments over this period April to June, 1944; they will pay it over a period of three years added to their current payment of taxes due. These measures may be expected to increase the yield from taxation in the year 1944-45, and if they are coupled with vigorous action against tax evasion we may expect still further improvement in the financing of our war effort.

(c) Lend-Lease. In October, 1943, Senator Keane made a statement to Parliament concerning the extent and general nature of the assistance received from the United States under lend-lease arrangements. The figures must not be taken as final, but indicate the importance of this source of war supplies and essential equipment. To the end of June, 1943, Australia had received goods and services valued at 552m. dollars (about E170m. Austn.) ; these had naturally been of tremendous value to Bus- tralia during the preceding years. At the end of November, 1943, the Prime Minister reported that Australia had made available to the United States, as reciprocal lend-lease, goods and


services valued at S79m. to the end of August, 1943. During the hancial year 1942-43 reciprocal lend-lease “represented 11.4 per cent. of the total Australian internal war expenditure. The percentage for 1943-44 will be considerably higher.” The value of reciprocal lend-lease for July and August, 1943 aver- aged E6-6m. each month, compared with the average of under S5m. per month for the previous year. In fact such has been the scale of our supply of fodktds , clothing, other goods, and services to the American forces that we may expect the d u e of them eventually to surpass the value of what we receive from the United States under these arrangements. Especially is this the case when we recall that in January of this year the United States government decided that in future, except in special cir- cumstances, capital goods would be transfmred from the cate- gory of lend-lease to a cash-purchase basis. However, it seems likely that Australia by participation in the Canadian Mutual Aid Scheme wil l do a good deal to compensate for any falling off in the volume of lend-lease goods and services from the United States. Over half these goods procured from America under lend-lease have been direct war goods, which with transport equipment, machinery and tools, and petroleum produck made up 80 per cent. of the value! of lend-lease imports. Their value for the Australian war effort can therefore be very easily appre- ciated.

IV Besides constantly attending to present problems of pro-

duction the Australian authorities during the past six months have been giving an increasing amount of thought and attention to future economic and social policy. Many decisions on present policy involve future development. For example on matters of self-sufllciency for defence several important developments have taken place. On 14th October, 1943, the Minister for Munitions announced that the Department had decided not to manufacture tanks in this country because “a standard vehicle which ab present is being produced in an Allied country . . . is regarded as eminently suitable for conditions of warfare in this theatre.” It is more economical to import these and to u8e our labour and resonrces for other purposes. On the other hand the Government decided in November last to go ahead with the mandacture of heavy bombers in this country, and it has recently been announced that the type to be made is the “Lan- caster.” In making the announcement M i . Curtin said that air


defence was ‘ ‘the most satisfactory means by which a small population can defend a large territory. . . . Australia cannot &ord to repeat the risk taken in this war of being depenaent on over- seas supplies of aircraft.” The project is also regarded as the logical sequel to the production of Beaufort medium bombers and Beadghterq and a step towards the production of high-class transport planes. In January, 1944, it was announced that the Commonwealth Government aircraft factories had delivered the 500th Beaufort towards the end of 1943, and more than 2,500 aircraft had been manufactured in Australia.

The government’s decision to expand aircraft production, is linked not only with its plans for future defence but also with its plans for the development of civil aviation. Largely owing to the work of the Allied Works Council the area of civil aerodromes has increased from 10,800 to 16,900 acres between July, 1939, and July, 1943. In spite of fewer machines the civil air- lines in 1943 carried more mail, passengers and freight than in 1939, and the Department of Civil Aviation has prepared a draft plan for development of air lines between all parts of Australia after the war. It is planned to provide aerodromes at distances ranging from 150 to 300 miles apart, and to bring Perth and Townsville within 24 hours flying time of each other. Closely connected with the development of aviation and the aircraft industry, is the Commonwealth Government’s decision to producc aluminium in this country. Mr. Makin announced in November last that a works was already in production in New South Wales, and that it was intended to put up a larger plant in Victoria. The output of these factories will be needed almost entirely for the aircraft industry during the war, but after the war it is intended that they should supply all the aluminium needed for the manufacture of pots and pans and other civilian goods. Equally a product of war-time necessity has been the manufacture of many drugs, and much medical and dental equipment. Mi. Beasley described this last November as “one of Australia’s major war-time achievements.” The manufacture of two of the very important sulpha drugs, morphia, hyoscine and atropine have certainly been important achievements, but perhaps the most notable feat has been the exploitation of a new source of supply of Vitamin D from the liver of the Australian shark. Here again we may have laid foundations of new industries which will continue a f t a the war.

Another war-time enterprise which will have most important permanent results is the Allied Works Council, set up


in February, 1942, to carry out urgent defence projects at the request of the Allied command in this area. As a result the works expenditure of the Department of the Interior which be- fore the war was just over Bm. per annum has expanded in a tremendous fashion. This expenditure rose to E9m. in 1939-40, to 2 2 h . for 1940-41, to B2m. in 1941-42, and to S56m. in 1942- 43. By June, 1943, the A.W.C. had completed 923 major projects, and had another 1,380 under construction. (A “major project” is one which costs more than ;E5,000). The chief of these major projects is the Sydney graving dock, but they also include more than 300 airfields, 13,200 acres of munitions factories costing S2!?im, and over 4,600 miles of strategic highways and access roads. It is not difficult to imagine the importance this construction work will have for the future development of Australia. They already constitute a most important instalment of public works for raising the standards of the Australiw people, and for encouraging immigration to this country. In addition the Commonwealth has begun to plan the public works to be embarked upon immediately the war ends. The National Works Council, on which all States and the Commonwealth are represented, held its first meeting in Canberra in January last, and received a report from Sir Harry Brown, the Co-ordinator General of Works. The Council adopted the report, and agreed that a programme of “urgent and important” public works in- volving an expenditure of BWm. (about double the amount undertaken in a normal pre-war year), should be prepared. It further resolved that all necessary preliminary steps should be taken by States and public authorities 50 that work could be started without delay as soon as war ceased. It was further rc- solved that immediately this first instalment of works had been planned in detail a second instalment would’ be prepared for submission to the National Works Council. It is the intention of the Commonwealth Government that this public works programme shall be s&ciently flexible to be an important factor in carrying out their programme of maintaining full employment after the war. But because there are likely to be certain shortages of materials and skilled labour immediately after tho war, they also wish through the National Works Council to eliminate competition between public authorities for these scarce resources, and to undertake a t first only projects which are “urgent and important” from the national point of view.

During the period under review the Prime Minister and Mi.. Chifley (as Minister for Reconstruction) have made impor-


tant statements with regard to the government’s attitude towards war-time controls, and their continuance after the war. These remarks were further amplified and emphasized by Dr. Evatt, in introducing the Constitution Alteration Bill in February. The Prime Minister in October last reviewed the conditions which made it necessary for the Government to adopt drastic powers of control over the Australian economy in order to obtain a maximum war effort. H e pointed out that any relaxation of these controls now would involve a weakening of the war effort. On the other hand he claimed that the Government had done all it could to see that the sacrifices involved in the war effort were justly shared, and that reasonable living standards were upheld. In addition it was laying the foundations of a great social security scheme. Mr. Chifley further elaborated the Government% aims on 1st December, 1943. These were “ a high and stable level of employment’’ as a means towards “rising living standards.” This meant, he said, that “we shall have to retain some controls ; not by any means all of them ; nor in unmodified forms. But there will be controls.” Mr. Chifley also touched upon a subject about which the Commonwealth Government so fa r has been very cautious in making any specific statement, namely our future external trade policy. Mr. Chifley said that there was “no suggestion of a policy of self-suEciency for Australia.’’ He took the view, however, that full employment was the first desideratum, and that “when such domestic policies of full employment are operating successfully in all countries, or a t least in most of the major trading countries (and perhaps not until then), the wodd wil l enjoy the conditions and atmosphere which permit of favourable consideration of tarif€ revision.” He also reiterated the willingness of the Com- monwealth Government to consider plans for an International Clearing Union, and to take part in international collaboration in other fields. The Government’s views on the subject of full employment were later emphasized by Mr. Beasley, as their representative of the I.L.O. Conference in Philadelphia, and they have more recently been officially adopted by the British Government. Mr. Chifley also went on to outline the Govern- ment’s plans regaxding social security. He quite justifiably rejected the principle of contributory insurance for social security as throwing “too much burden on the shoulders of those who can least bear it.” Accordingly, in February thig year Bills were introduced to provide for both Unemployment, Sick- ness and Special Benefits, and for Pharmaceutical Benefits. The


scale of benefits under the former Act are adequate without being extravagant, while the provision of free medicines wi l l be great boon to chronic invalids, diabetic, and tubercular subjects, and many other people. The latter Act is expected to be brought into operation this year, but the date from which the social security scheme will begin has not yet been fixed. An amend- ment was also made to the Invalid’ and Old Age Pensions Act in February, by which these pensions were made no longer subject to automatic adjustments in accordance with changes in the cost of living index.

Another importaxkkgtep was taken last January when a t a conference of Commonwealth and State ministers it was agreed that Commonwealth and State Governments would co-operate after the war in carrying out a national health scheme, in which the Commonwealth would shoulder much of the financial re- sponsibility. At the same conference it was agreed that the Commonwealth and States would co-operate in carrying out a national housing programme after the war, and again that the Comimonwealth should assist the States financially in carrying out the Scheme. It is proposed that the S t a t e should undertake to build 30,000 low-cost dwellings in the first year after the war, and it ie hop& that private enterprise (perhaps with some financial assistance) will bnild another 20,OOO. This is to be the first step towards liquidating the shortage of 250,000 to 300,000 houses, which is the estimate of probable shortage at the end of the war. This agreement is apparently the 6rst-fmits of the appointment of the Commonwealth Housing Commission last year, as part of the planning for reconstruction. The Prim6 Minister estimated on 7th February, 1944, that the probable cost of the scheme to the Commonwealth in the h t year would be ;E5oo,OOO, rising to €5m. a year after ten years.

One other event deserves mention: the appointment of a Secondary Indrntries Planning Commission at the end of October, 1943. The Commission will function within the Department of Reconstruction, and wil l work in close cooperation With other similar agemcies such as the Rural Reconstruction Commission, Commonwealth Housing Commission, and Nationil Works Council. Representatives of the Departments of Wan Organiza- tion of Industry and Supply w U sit with it whenever desirable, and the long and valuable experience of the Tariff Board is to be made use of whenever possible. The task of this body is 10 survey wartime industrial development in Australia “with special regard to Government factories, particularly munitions


establishments and annexes, to define a policy of industrial development in Australia, and to $an and recommend to the Government the meammi needed to carry out such a programme. ,’ There are signs that the Government is not prepared to sacrifice the investment of SlOom. of public money “for a song” after the war, and that it is beginning to think about ways in which this investment might best be turned to the public advantage, as well as about the indnstrial development of the country as a whole. Private business has been quick to raise its voice in protest against the possibility of government factories encroaching on “the field of private enterprise.” What the outcome wi l l be wil l no doubt largely depend on the result of the coming referendum on Commonwealth powers, and on the political -per of the electorate. But at any rate it is clear that much thought is now being given to “problems of reconstruction.”

HERBERT BURTON. U&ersity of Melbourne.

B

the economic record:june, 1944 : the australian war economy, november 1943-may 1944

Documents