Great Depression in Australia - Legacy of The Great Depression in Australia

Legacy of The Great Depression in Australia

During the Second World War, the Australian Labor Party formed a government in the House of Representatives, led by John Curtin (1941–1945) and, after Curtin's death, Ben Chifley (1945–1949). Curtin and Chifley, who often used the spectre of another depression in their campaign rhetoric, utilised emergency wartime powers to introduce a command economy in Australia based on Keynesian principles. Unemployment was virtually eliminated in this period, being reduced below 2 percent. In 1942 income tax became federally controlled with the states conceding that the war effort needed a centrally controlled financial basis.

In 1944 Curtin announced the plan for a white paper on full employment. This white paper served a variety of roles; to establish the priority of full employment; to ensure the depression would not recur; and to propose ways to make these objectives possible. Dr H C 'Nugget' Coombs as director-general of the Reconstruction Ministry had major input into this policy. The economic theories proposed by J M Keynes in 1936 were a major influence on the white paper.

Between 1947 and 1949 Chifley also attempted to nationalise the banking sector, claiming that public control over the finance industry would assist in preventing further depressions. These plans saw bitter and protracted opposition from the media, conservative parties and the banks themselves, and the High Court of Australia ruled that the proposed nationalisation of banks was unconstitutional.

After the ALP had returned record results at the 1943 and 1946 election, Chifley's government was soundly defeated by the Liberal-Country Party Coalition led by Robert Menzies in 1949. The combined threats of international (and domestic) communism and industrial unrest along with the public's waning support for extended rationing and intervention following the close of the War saw Menzies returned with a comfortable majority in the House of Representatives. Though Menzies was a conservative, his sixteen subsequent years in power saw the government continue the use of Keynesian methods in economic policy as well as further expansion of the welfare state and public services such as higher education, research and development and public housing. Public support for these may have been a legacy of mass experiences of poverty during the Great Depression.