total war–with reservations (australia's war economy, may to october, 1941)

TOTAL WAR-WITH RESERVATIONS (AUSTRALIA’S WAR ECONOMY,

MAY TO OCTOBER, 1941) I. The Shoe Begins to Pinch. 11. Prospectus for Total War.

111. Administrative Preparations. IV. Second Thoughts and Caution. V. Conflicting Objectives in Agricultural Policy. VI. Uniformity of Taxation Proposals and Loan Programmes

VII. Proposals for Compulsory Loans and Banking Control. for 1941-42.

1

By December, 1939, the general framework of Australia’s war economy had been established, as fa r as the control of overseas trade, finance and prices was concerned. The following twelve months or so saw the acquisition of esperience in the administration of these controls, and the development of new ones, relating more particularly to the production drive. From the beginning of 1941, the shoe began to pinch. Shortage of efficient labour, for industry and agriculture alike, brought man- power problems increasingly into the limelight; and the first tentative steps towards the restriction of non-essential production came up for consideration. On the financial side, too, the demands of the Commonvealth increased so rapidly that it appeared likely that other claims on the resources of the citizen vould have to give way. In short, the economists’ analysis of mar economics began to appear more plausible, as the choice between a maximum war effort and the pursuit of other objectives became increasingly evident.’

In reviewing the period from May to October, 1941, i t is necessary to record some further developments along the lines already observed in the preceding period, especially in relation to man-power, coal production, and shipping control : examples of determined efforts to place war needs first. But no less striking are the instances of reluctance to sacrifice other objectives, when these appeared to be menaced by proposals relating to an intensified war effort. On the economic side, a t least, total war remains for the Australian people an unattainable goal, despite the abundant lip service which is paid to the idea of an “all-in” war effort. The country’s achievements on the

1. See previous articles by E. R. Wnlker and Margaret E. Riley “Auatralia’s War Economy.” in the issues for December, 1939, and June, 1940; .‘nd by E. R. Walker and R. M. Beecroft. “New Developments in Australia’s War Economy,’’ in the issue for June, 1941.

166

DECv 1941 TOTAL WAR-WITH RESERVATIONS 167

production side have continued to give satisfaction, particularly when viewed in the perspective of the past few years. Unfor- tunately, however, a country’s capacity to defend itself must be measured against the military strength and war production of its enemies, not against its own pre-war weaknesses. It is from this viewpoint that the struggle between war needs and other objectives becomes a matter for concern.

I1 Inspired by his first-hand observation of the sufEerings and

courage of the British people, and impressed by the lengths to which the British Government was going in plans to divert production to war purposes, the Prime Minister, on his return to Australia in May, 1941, stated that the Government would under- take a re-organisation and intensification of the nation’s war effort. “So fa r our national structure has been, with some modifications, largely that of peace. These things must change. Our national organisation must become one primarily for war. Civil industry must become that which we can afford out of the total organisation of a country which is a t war. For winning this war your Government will completely disregard all sectional interests, business profits and private comforts.” Among the specific measures he had in mind‘ was a policy of reducing non- essential production and concentrating essential civilian production in a limited number of firms, so as to release additional productive equipment for war work, along the lines of British plans. “We propose to set up an authority which will drastically review civil production. We will give to i t not only wide powers to take over factories and plant, or if necessary, to close factories in whole or in part, but also powers like those recently announced in Britain by the Board of Trade to concentrate production on a limited number of organisations. . . . At the same time we shall make a drastic overhaul of consumption by cutting non-essential imports to the bone, whether they are sterling or non-sterling, and whether by prohibition or, in the case of such commodities as newsprint, by rationing.” Further restrictions on luxury building, and reduced rations of petrol were also forecast.

Along with these restrictions upon civil production and consumption, there would be positive measures t o increase production. Reserved occupations were to be overhauled ; increased use was to be made of women in the Services as well as industry ;

168 THE ECONOMIC RECORD DEC.

and there was to be “a much more comprehensive and detailed marshalling of labour resources. ” Administrative changes were also promised in the Department of Munitions. Further, the Government would assume “the most complete and absolute authority over the use and movement of ou r merchant shipping”; and a single Commonwealth transport authority would be set up which could ca-ordinate all forms of transport in an emer- gency. A small commission would be established “ to direct the production, distribution and supply of coal. ”

The Prime Minister also promised to prohibit strikes and lockouts; to intern disloyal communists; and to take necessary remedial action against any employers who caused industrial trouble--“if necessary taking over the business conducted by that employer o r group.” A greater share of responsibility was to be given to private members of Parliament, and in particular war profits would be watched by an all-party Standing Com- mittee.2

This appeared to be a programme for energetic steps towards “total” war. Within five months, however, the Government was defeated, when the two independent members of Parliament, on whose support it depended, decided that the time had come for a change of Government. Even before this, the Prime Minister (Mr. Menzies) had stood down to make way for the leader of the other Par ty in the coalition (Mr. Fadden). The Labour Par ty claimed that, by taking office, it would strengthen the war effort ; but there is no need to discuss here the extent to which the struggle for political power may itself have absorbed energies in all parties, which could have been devoted to the prosecution of the war. It is, however, worth reviewing the progress made during those five months, along the lines of the Prime Minister’s own prospectus ; and to consider the extent to which any failures may be attributed to the conflict between war needs and other objectives.

I11

Little time was lost in modifying and‘ extending the administrative machinery along the lines indicated as necessary for an intensified war effort. I n June the Cabinet was enlarged to include five new Ministers, and five new Departments- Aircraft Production, Transport, Home Security, External Terri-

2. From the Prime Minister’s broadcast, 88 reported by the Melbourne Argus, April 18. 1941.

1941 TOTAL WAR-WITH RESERVATIONS 169

tories, and War Organisation of Industry-were established. The Prime Minister had already appointed a separate Minister for Munitions to take over that Department, which the Prime Minister had hitherto retained under his own control. The distinction between Supply and Munitions, already initiated when a Director-General of Munitions had been appointed,8 was now further emphasised by the appointment of a Director- General of Supply, and separate secretariats for the two Depart- ments.‘ Two Committees of Cabinet were established-the War Cabinet and the Economic and Industrial Committee (the former under the Prime Minister and the latter under the Treasurer). This was not a new idea, as a similar division of the Cabinet had been made a t the beginning of the war. But the Economic Cabinet had not operated effectively as a uni t ; and now an attempt was apparently to be made to set it on its feet. The Prices Commissioner (Professor D. B. Copland) was appointed economic consultant to the Prime Minister and liaison officer between the Prime Minister and the new Economic and Industrial Committee of Cabinet. Moreover, six of the nineteen Cabinet Ministers were not included in either the War Cabinet or the Economic Committee, in order to keep these Committees from being too unwieldy.

The promised Parliamentary Committees were appointed, on War Expenditure, Social Security, Man-power and Resources, Broadcasting, Taxation, and Prices and Profits. Although a case might be made for making fuller use of the private member in war time, the establishment of these committees was widely criticised. Many people thought this was an extravagant form of expenditure and a dispersal of energy.

The Coal Commission was established in place of the Coal Board, and the single Commissioner was endowed with almost dictatorial powers in the industry. He is not to take part in the management of any coal mine or company; but he may control the opening of new or closed mines, 6x prices and rail freights for coal, and require stocks to be held and coal to be transported to any place. He may order quotas to be filled by various mines, acquire coal from any owner, and control the sale of coal in general. The regulations also permit the Governor-General to

9. See “New Developments in Australia’s War Economy.” Economic Record. June, 1941. P. 4.

4. The Secretary for SUPP~Y had previously acted as Secretary for Munitiona; he wan now transferred to Munitions and a new Secretary for Supply appointed. In each m e the Secretmy is charged with the general administration of the Department. But the Director-General (who is what the Americans call “a dollar a year man”) exerciaea wide powera of initiative and execution. intermediate. M it were, between thoae of a Minister and a permanent head oi a Department.

B


limit profits from coal mining; two-thirds of any excess profits may be applied by the Commissioner to compensate owners and miners when production is restricted by his orders. When production quotas are transferred from one mine to another, the owner of the latter mine may be required to contribute compensation to the other owner and retrenched employees.s Questioned about this control of the industry, the Prime Minister said it was “rationalisation, not nationalisation.” This may have been intended as a verbal counter to the suggestion that other industries, notably the iron and steel industry, should be nationalised. It could be argued that competition was dis- organising the coal industry, and that integration could best be ensured by Government control of the type adopted. Thus the question as to whether all large industrial monopolies should be nationalised could be left to be debated on other grounds than the need for integration.

Powers to control Australian shipping had already been taken early in 1941.- In Ju ly the Government exercised these powers by requisitioning 63 ships, which have since been managed as a fleet by the Shipping Control Board.

In man-power policy, too, definite steps were taken with a view to a better adjustment of the competing needs of the Services, munitions production and essential civilian production. There already existed a Man-power Committee with representatives of the Services, responsible to the Minister for Defence Co-ordination ; and provision had been made for research into man-power problems by the Department of Labour. While the Man-power Committee, through its District Man-power Officers, received information regarding the effects of enlistments and “call-ups” on the economic life of various parts of Australia, there appeared to be need for still more systematic study of the problems of man-power allocation in relation to the war effort as a whole. The Government therefore established a new advisory authority, known as the Man-Power Priorities Board, with a Deputy-Director of Man-power Priorities in each State. This organisation, which is under the Minister for Labour-not Defence Co-ordination-is concerned with fundamental questions of policy (such as the revision of the list of reserved occupations) but not with the administration of the system of exemptions and regulation of enlistments, which remains the function of the original Man-power Committee under Defence Co-ordination.

6. Statutory Rules. 1941. No. 189. All rules nre readily accessible in the War Lsgialation Sffoicc. published by the Australian Law Book Coy.


On paper, then, Australia has practically all the administrative and advisory machinery necessary for the control of labour, materials and productive equipment, and their concentration on important war work.

rv It is too early to expect much in the way of results which

can be directly traked to the new administrative arrangements. Progress figures of munitions production, if they were available to the public, might convey a much better impression of a determined, unified war effort, than do the weaknesses to which attention is drawn in the remaining sections of this article. “Let the record speak” is not the fairest method of evaluating Australia’s war effort, because the record, in so fa r as it can be made public in war time, tells only part of the truth. But the accumulation of evidence of the continued power of sectional interest, and of intellectual confusion regarding the implications of a “100 per cent.” war effort, is nevertheless disquieting.

The two most striking examples of failure to proceed with the prospectus for a total war effort are in relation to industrial peace, and the war organisation of industry. Although the Government proposed to jail communist agitators and to take over the businesses of employers who precipitated industrial stoppages, in this case bold words were not the prelude to bold deeds. It is true that the Government refused to accede to pressure for the release of two men detained since December, 1940, under the National Security Regulations. But negotiation and compromise have contimed to be the favoured methods of settling disputes, rather than prison for the ringleaders. Possibly the Government’s actual policy was, in this respect, better advised than its plans. Some a t least of the industrial stoppages reflect the strain of unduly extended hours and speeding up, and i t is possible that a “strong” policy of repression would have caused widespread dislocation of the war effort.

The same argument might be advanced, in modified form, to justify the Government’s delay in proceeding with the re- organisation of civil industry; since many sections of the public were inclined to oppose the proposals to restrict non- essential production, and this opposition might have grown to such proportions that the whole war effort would have been imperilled. But the proposals were fundamentally sound ; the re-organisation of civil production is an essential method of releasing the labour and other resources which will be needed

172 T H E ECONOMIC RECORD DEC.

if the Government’s war production plans are to be accomplished. Public opposition, in so far as it arises from intellectual confusion, can be combated by popular education-even if this means that politicians must eat some of their own words. And opposition based on sectional interest can be publicly exposed for that it is-the elevation of private gain above national defence.

On paper, a t least, the necessary administrative arrangements were made. Some surprise was caused by the decision to place the new Department of War Organisation of Industry under the Treasury. But, as well as a Minister, the new Depart- ment was to have a Director (Sir Harry Brown, already Loan Council Co-ordinator of Public Works) and an inter-depart- mental committee-“the chairman of the Tariff Board, the man- power authority in the Labour Department, and representatives of such Departments as Customs, Commerce, the Treasury and Supply. ” The Department would be “concerned primarily with the conserving and directing of man-power and machine power, in the formulation of specific plans and methods of procedure in particular industries, the activity of which it is felt, should be curtailed in the interests of the national war effort.”6 There was almost immediate criticism of this idea, because it might came unemployment. In Parliament, the Prime Minister, when asked whether the Government would guarantee employment to those who were thrown out of work, replied that “No Government could give such a guarantee.”‘ Bu t in most subsequent statements stress was laid on the Government’s intention to proceed cautiously in restricting civilian production. It was later announced that committees would be established in various industries, and that the Tariff Board was beginning “investigations into the effect of war demands on the woollen and cotton textile and boot and shoe industries.” The possible desirability of civilian rationing was also to be investigated.*

Admittedly, the need for thorough investigation stands i n the way of rapid results; even in Britain the policy of concentration has proceeded very slowly. But when all allowances are made, the impression of.reluctance to interfere with established industry remains. A guarantee of either employment or alternatively of unemployment benefit to all displaced workers would have cost relatively little ; and a well publicised

6. Prima Minister. aa reported in the Svdndy M o r n i n g Herald. June 27, 1941. 7. Svdnsv Morn ing Hszald. July 3. 1941. 8. ~Melbourna A z g w . Auguat 19. 1941.

1941 TOTAL W A R W I T H RESERVATIONS 173

attack on obviously non-essential production would have demonstrated the Government's determination to produce the maximum war effort.

V This impression of reluctance to disturb existing livelihoods

is codrmed by a qonsideration of agricultural policy, following the agreement negotiated in June, 1941, between the United Kingdom and Australian Governments, regarding the production and storage of foodstuffs. Owing to the shortage of shipping, it is not economic for Britain t o purchase as much from Australia as she might in normal times. The United Kingdom undertook to purchase as much of our food products as could be shipped, and the Australian Government undertook to adapt production, as far as possible, t o meet the exigencies of the shipping situation. This involves the de-boning, canning or pressing of meat, powdering of eggs, and conversion of butter production facilities to cheese production. In urging the adaptation of primary production to meet war needs, the Government is acting consistently with the prospectus for a total war effort.

But what of the agricultural industries which can find no market for their goods-goods which are not essential in war time, but need no government action to prevent their continued sale to the consumer? The principles of total war imply that the workers in these industries (and, wherever possible, equipment) should be diverted to production which is needed' for war purposes. This is a hard saying, for a farm or orchard is not a factory, which can be boarded up until after the war, or used for other types of production. A farm is an asset, and abandoned farms are wasting assets. Even if individuals were in some way compensated for the loss of capital invested, there still would remain the possibility that, in the post-war period, markets might be regained, and what is non-essential production in war time might again become an important source of national prosperity. Considerations of post-war reconstruction, therefore, suggest that productive organisation in agriculture should be maintained, even if this means retaining in agriculture a considerable number of workers, who conld make a greater contribution to the present war effort in some other type of employment.

This implies the sacrifice of part of our potential war effort to another objective-post-war prosperity. So long as we can


afford it, the sacrifice may be justified on the same terms as any other use of labour and energy in preparing for the post-war world, rather than in activities related to immediate war purposes.

But the method chosen to keep these workers in agriculture is for the Government to purchase what they produce, and, if possible, to store it. Under the agreement, the United Kingdom and Australian Governments a re to share “the financial burden of acquiring and holding reserve stocks of storable foodstufFs up to certain quantities to be agreed”; the quantities to be stored are “ to be determined in relation-

“ (a) to probable demands during or after the war; “ ( b ) to the importance of the industries to Au~t ra l i a . ”~

The Minister for Commerce (Sir Earle Page) concluded his account of the agreement with the following words: “ A main object of the joint plan is to secure as much stability for the primary industries as the circumstances will permit. Certainly the stability will in moEt cases be at a lower level of prices, and it may also be a t a lower volume of production. The Government will in all circumstances, exert every effort to preserve the basic structure of the industries. ”lo

Assuming the latter objective in the interests of post-war reconstruction, it should be possible to make other arrangements which would release a larger quantity of labour during the war. As the Tasmanian Minister for Agriculture (Mr. D’Alton) has pointed out, i t is not necessary to bring apples to maturity in order to keep orchards in good condition; and much wheat land would be benefited by a prolonged rest. Industries could be classified on the basis of the extent to which continued production is essential if future productive capacity is not to suffer. There are some industries in which a reduced staff could perform sufficient operations to prevent deterioration, without producing anything for sale. Apples can be sprayed off the trees a t an early stage, and wheat land can lie fallow. Less labour would be required, but the workers would need to be paid on some other basis than a price for their crop. This should not unduly tax the ingenuity of the Government’s advisers.

Such a scheme would strengthen the claims of the primary industries for special consideration in man-power policy. Under present conditions, exemptions from military training may be

9. Parjiamentary Debate., First Session. 1940-41. No. 9. p. 507. 10. I b i 4 D. SOB.


granted for men to produce wheat that may not be sold until after the war, and apples that are destined to rot-a situation flagrantly inconsistent with the prospectus for a “hundred per cent. war effort.”

VI The conflict between the idea of a maximum war effort and

other objectives is also visible in the world of Government finance. Both in loan policy and taxation there have been differences of opinion between Commonwealth and States.

Reference was made in a previous article to the Common- wealth’s desire for greater uniformity of State income tax.” The Commonwealth has always allowed the State tax as a deduction from income before assessing the Federal income tax. This means that the effective Federal tax on any range of income is heavier in States with low rates on that range of incomes. With the growth of the Federal tax, the value of this deduction for State tax has increased accordingly, with the result that the margin between the total tax (Federal and State) payable in the various States on any range of income becomes smaller and smaller, while the burden of additional Federal taxation tends to be concentrated increasingly in the low-tax States. In its desire to obtain still more revenue, the Commonwealth could abolish the deduction for State tax, and, disregarding the structure of State taxation altogether, fix its own rates to yield the necessary revenue. Some high-tax States might then be forced, by their own taxpayers, to reduce taxation on certain ranges; and perhaps to reduce expenditure. Another course would be for the Commonwealth to concentrate on the untaxed surplus in the low-tax States, by simply raising its rates and allowing the deduction for State tax to discriminate in favour of taxpayers liable to heavy State taxes. To carry this course to extremes, the State tax might be allowed as a deduction from the Federal tax, instead of from the income; although many lawyers (not all) would consider this unconstitutional.

At a Premiers’ Conference in June, 1941, the Commonwealth Treasurer submitted a plan which involved, in effect, a compromise between these two extremes; but also the vacation of the field of income tax, including company tax by the States, for one or two years. The States were to be compensated, of come. If the compensation were to be equal to the revenue forgone, this mould

11. Ecaomic Record, June, 1941. p. 18.


be equivalent to allowing the former State tax as a deduction from the Federal tax, since the new Federal tax would fall evenly on taxpayers in all States. But if the compensation were to be on a per head basis, according to the revenue forgone by the low-tax States, the results would be similar t o abolishing the deduction altogether; since the high-tax States would be financially embarrassed and would have to reduce expenditure or impose other taxation. Mr. Fadden's proposal included a basic compensation of the latter type-70/- per head, making a total of E24m. for all States-and a n additional sum of E5m. to be divided among the States as they might agree. It was suggested that the low-tax States should take a smaller share of the latter sum, so as to relieve the strain on the high-tax States, which would come worst out of the basic compensation. Since the total compensation would be about E3m. less than the total revenue of the States from income tax in 1939-4-0, the high-tax States in particular mould have to effect some economies.

This plan was an ingenious attempt to kill at least three birds with one stone. Tax administration would be greatly simplified; some reduction in State expenditure, or at least a check to further increases, might be expected; and the Commonwealth would be free to impose a l e v on the untaxed margin in the lorn-tax States. But the proposal was firmly rejected by all the States, chiefly because it appeared to threaten their Gnancial autonomy, not only during the war, but also in the years to come. The Commonwealth Treasurer disclaimed any such intention ; but the Conference achieved nothing, except to emphasise that the Commonwealth Government (which has ample powers) must decide for itself how fa r it will respect the taxing systems of the States in its own search for revenue.

The meeting of the Loan Council in August, 1941, was another occasion for difference between the States and Common- wealth. After severely pruning the loan proposals for 1941-42, the Loan Council Co-ordinator-General recommended programmes (for purposes other than defence) of E24m. (net), including €7m. for semi-governmental and local authorities. The Common- wealth, in view of the calls to be made on the loan market for war purposes, pressed for a reduction of the total to €20m., and undertook to make this sum available if agreed to by the Council. Four States voted against, and two States, perhaps in recognition of the Commonwealth's power to prevent them raising any loans of which it disapproved, voted for the reduced


total. With the Commonwealth’s two votes and its casting vote, the support of these two States gave a bare majority for the unpopular proposal.

From these episodes, it seems evident that the maintenance of the financial independence of the States is an objective which will not be lightly sacrifked, even when the Commonwealth urges the supremacy of war needs. While i t can be argued that the necessary degree of forbearance by the States has so fa r been secured without infringing their “constitutional rights,” the opposition between State financial autonomy and a “hundred per cent. war effort” is likely to become more pronounced as the economic demands of the war effort continue to grow.

VI I

Without attempting a systematic appreciation of the Budget which provided the occasion for the defeat of the Government, attention may be drawn to two novel proposals which it contained; namely, compulsory loans, and an agreement to exercise greater control over the trading banks.

Out of an estimated expenditure of f319m., no less than E217m. was to be fo r mar purposes. To raise the total, the Government had to find €154m. more than would be obtained from existing taxation. It proposed increases in income tax (Elm.), company tax (€2,5m.), and post office charges (€1.5m.), to yield 67m.; leaving f147m. to be borrowed (compared with about E60m. in Australia last year). Of this, it was proposed t o raise E25m. by compulsory loans (including E5m. from undis- tributed company profits). In distributing the burden of this compulsory loan, the Government made another ingenious, if tortuous, attack upon the problem of unequal State taxation.

The Government proposed to assess, in the first place, a National Contribution on all individual incomes over €100, and rising to 18/- in the € “on high incomes.” This National Contribution would in general cover both Federal and State tax in the highest taxing State. The State tax paid in the previous year, and the Federal tax payable in the current year, were t o be deducted; and the balance would be the amount of compulsory loan-also referred to as ‘‘the War-time Contribution” o r “Post-war Credit.’’ For Federal income tax purposes, the deduction for State tax was to be abolished; thus the wealthy Queenslander and the wealthy Victorian would pay the same


amount in Federal income tax, but the Victorian’s compulsory loan would be heavier because his State tax was lower.12

With these compulsory loans it would still be necessary to borrow another €122m., or twice as much as the war borrowings of 1940-41. This could not be accomplished without recourse to credit expansion. Since the expenditure of loans from the Commonwealth Ba,nk increases the liquidity of the trading banks, there would be danger of a “secondary expansion” of credit, and excessive profit-making by the trading banks. The Govern- ment had therefore obtained a voluntary undertaking from the trading banks that they would not seek excess profits, and would “not make new advances or increase existing advances except in accordance with the policy laid down by the Commonwealth Bank from time to time, )’ and would only purchase Government bonds with the concurrence of the Commonwealth Bank. Such a policy might lead to the accumulation of excess cash reserves, and the trading banks agreed to place any “surplus investible funds accruing in their hands” on special deposit with the Commonwealth Bank, a t “such rates of interest as will avoid the trading banks making excess profits out of war conditions.” The Commonwealth Bank was to 6x the interest rates and decide the amount of these special deposits, on advice from the trading banks as to “what funds become available as above.” The trading banks were to supply the Commonwealth Bank with a monthly analysis of new and increased advances, t o provide a check on their lending policy; and with such certificates from the Commonwealth’s Commissioner of Taxation as would enable the Commonwealth Bank “to satisfy itself that the undertaking regarding profits was being observed. ”13

Interesting points in this agreement are, the complete delegation of the administration of the controls to the Common- wealth Bank; the stipulation that the whole arrangement is a war-time measure; and the absence of any provision for the publication of the rates of interest allowed on these special deposits or of the contents of the Taxation Commissioner’s certificates. It is altogether remarkable that an undertaking to supply a monthly analysis of new and increased advances should

12. There were some further complications. Property incoma, pay a heavier tax than incomes from personai exertion, but the National Contribution was to be the same: so that incomes from personal exertion would contribute equally during the war. but receive a post-war credit for the difference in rater of tax on the two types of income. The National Contribution was to be adjusted according to the nizo of the family; but in view of the institution of child endowment for aU dependent children in excess of one. the deduction for children for income tax purpoien wan abolished, except for the flrst child.

13. Appendix to the Trearurer’s Budnet Spccch. as printed.


be obtained only after two years of war. And the gravest doubts about the whole arrangement are aroused by the Treasurer’s statement that there was no evidence of excess deposits up to date. This was based on the observation that employment and deposits had increased by about 14 and 15 per cent. respectively, since the outbreak of war. No reference was made to the increase in the trading banks’ cash over the same period (about E40m.) which was a real source of danger. If the Government felt that the growth of deposits and cash, to date, gave no cause for concern, it might continue to misinterpret the figures in the future.

The Treasurer’s statement contained much sound material on the need for personal restriction of e x p e n d i t u r e a plea echoed later by his successor. But even in its dying gasp, as it were, the Government showed signs of reluctance to limit freedom of enterprise. “The growing needs of war must reduce the supply of many civil goods. The Government has already placed restrictions upon imported non-essentials. There is little doubt that those restrictions will have to be extended-possibly into the field of home produced goods.” If this is to be a hundred per cent. war effort, for possably read unquestionably.

The Labour Government inherits the solid foundations laid by its predecessors for the expansion of war production, and a fairly complete administrative framework of economic and industrial controls. But i t also inherits the conflict between the implications of total war and the pursuit of other objectives. It is yet too early, however, to attempt any appraisal of the new Government’s economic policy from this viewpoint.

E. RONALD WALKER. University of Tasmania.

total war–with reservations (australia's war economy, may to october, 1941)

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