CHAPTER XXXI. FROM THE TREATY OF VERSAILLES TO THE SECOND WORLD WAR
The years from 1933 to 1939 saw a marked economic recovery in Australia, as in most other countries of the world, though there was another temporary setback in 1938, owing to a fall in export prices. By 1937 the loss in national income had been completely restored, unemployment had fallen to pre-depression levels, and wages were restored to their previous levels and even above them. This recovery was, of course, largely due to the rise in prices of our exports, but it was also largely due to the policy followed in Australia. After 1931 the Federal government and the Commonwealth Bank worked harmoniously together. The various governments carried out the 'Premiers' Plan,' and the Commonwealth Bank helped them by providing money to meet deficits until they could balance budgets. The Commonwealth and the States through the Loan Council (established in 1928) also planned public works for which the Bank helped to provide the funds. These works not only helped to increase production and income, but also increased employment. Private business also recovered, and in particular there was a great expansion of manufacturing industry which surpassed all previous levels of output and employment. In some ways the depression had helped in this expansion. The fall in wages had reduced manufacturers' costs and helped them against overseas competitors, whilst keen competition forced them to be more efficient. In particular there was a great expansion of iron and steel production; by 1934 it passed all previous records, and then doubled in the next three years. This was to be very useful to Australia when she found herself again at war in 1939, for steel is essential for tanks and guns, battleships and munitions. The companies which had exploited the mineral wealth of Broken Hill began to make steel in 1915, and the Broken Hill Proprietary Ltd. by 1937 was able to make steel as cheaply and efficiently as anywhere in the world. It draws its iron ore from Iron Knob in South Australia through the port of Whyalla, which has itself become a steel producing and shipbuilding centre. But the main B.H.P. works are at Newcastle, and they draw their coal from the company's own mines in that district. Other industries like textiles, chemicals, engineering and motor body works also expanded greatly, and proved immensely valuable when war came. The production of aircraft was also begun, and though this is an industry which takes time to establish soundly, we have been able to produce hundreds of planes for service duty. In the war of 1914-18 Australian armies were mainly equipped with British guns, shells, and tanks, but in the Second World War we have provided for practically all their needs except tanks, some aeroplanes, and some other very specialized equipment. There was also a considerable expansion of primary production, particularly in dairying, and meat production By 1929 the number of sheep had just recovered, after a period of droughts and low prices from 1890 to 1910, to the figure reached in 1891 (106,000,000), but they went on increasing to the record numbers of 116,000,000 in 1939. Production of butter, cheese, meat, sugar and dried fruits also went on increasing, but the wheat farmers still suffered adversity. Prices on the whole remained low and unprofitable for many, and the area under wheat declined though the production on the average showed no fall. A number of farmers gave up wheat-growing for other occupations. Reviewing the period of the depression and recovery, there were some exciting events when feelings ran high and at times some people feared disorder and even revolutionary risings. The communists were a bogey to the respectable classes and much was made of the 'red menace,' particularly at elections. But in actual fact their numbers were small and the danger was exaggerated, although their ideas did gain more sympathy and support in the dark days of depression. But as prosperity returned and men got jobs and better wages, the influence of communist ideas declined. The experience of the depression left its mark on peoples' minds, however, and public opinion grew in favour of governments doing more to control booms and slumps, and taking measures to protect people from the disastrous effects of unemployment. Governments and the Commonwealth Bank were both doing something in this direction, and in 1938 the Lyons government passed a National Insurance Act to insure wage-earners against unemployment, sickness, old-age, and invalidity. But many sections were dissatisfied with the actual measure, and it did not come into operation.