1939: Australia

Defense Policy.

To an extent not generally appreciated in the rest of the world, war and preparation for war dominated Australian life in 1939. In December 1938 a three-year defense program adopted six months previously was expanded to provide for an expenditure of 63,000,000 Australian pounds. This figure soon went by the board as the pace of preparedness was accelerated. Early in the year the voluntary militia exceeded the projected strength of 70,000, but more applicants were nevertheless accepted. The Government tentatively approved a plan to establish a permanent, professional military force of 7,500, to be recruited in five equal annual instalments — an enterprise later abandoned because of its cost. Over the opposition of the Labor party, compulsory registration of the country's man power of military age was effected as a prelude to conscription if and when necessary.

For the first time, many Australians were seriously concerned with their plight in case of a world-wide war, when Britain might not be able to supply the armed forces necessary for Australian home defense. This consideration impelled the Government to speed up the development of domestic Australian industries to the utmost, with special attention to war needs. A Department of Supply and Development was established to plan and supervise the new industrial enterprises. While rapid expansion was hindered by a serious shortage of factory space and skilled labor, great progress was made during the year, particularly in the munitions industry proper. Aircraft parts are now being manufactured and assembled in the Commonwealth, and local production represents a valuable supplement to large purchases of American planes. The air objective was fixed at 19 squadrons of 212 first-line aircraft. Government and industry, moreover, have cooperated to manufacture most of the equipment used by the land forces. As for the navy, new light vessels are being constructed, and the northerly harbor of Port Darwin is being developed as a naval base.

Climaxing its strong diplomatic support of the British Government since the Munich crisis, the Cabinet of Prime Minister R. G. Menzies not only considered the United Kingdom's declaration of war as binding upon Australia, but immediately began strenuous efforts to make its participation effective. Under a constitutional provision, compulsory service overseas is forbidden. Despite a sharp parliamentary protest by the Labor opposition, however, Mr. Menzies went forward with plans to send 20,000 volunteers to Europe as soon as they had completed their training. Additional instruction for the entire militia force — now totaling 78,000 — was begun. On Oct. 20 the Government announced that compulsory military service for domestic defense, which had been abolished in 1929, would be restored in 1940.

Defense expenditures for the fiscal year 1939-1940 were raised from £26,250,000 to £59,500,000, as compared with an outlay of £19,600,000 in the first year of the World War. The nineteen-squadron airplane program is being rushed to completion by June 1940. Although senior Australian air officers apparently sought to preserve the distinct identity of a Commonwealth air force in Europe, the Government is participating wholeheartedly in the Empire air training plan. A quota of 26,000 men will receive instruction in Australia and Canada before their incorporation in the amalgamated Empire force.

Economic Situation.

The general economic situation in the Commonwealth was by no means auspicious for the expanded defense program. Severe drought and the continuance of low prices for such vital Australian exports as wheat, wool and meat adversely affected the country's financial position. Expanding home industries kept unemployment at a low level, but fiscal difficulties nevertheless arose. It was necessary for the Commonwealth Bank (Australia's central bank) to subscribe £6,000,000 to assure success of a £71,700,000 cash and conversion loan on Dec. 15, 1938; and the Commonwealth failed to secure more than 56 per cent of the £8,500,000 sought in a public works loan in February. In August a conference of Federal and state Premiers considered a scheme for additional assistance to wheat growers protesting low prices, in return for restriction of production.

With the outbreak of the war some of these difficulties were mitigated. On Sept. 5 Prime Minister Menzies announced that the United Kingdom would purchase the entire Australian wool clip for the duration of the conflict at a pre-arranged price. Britain has also increased its quota for Australian sugar and agreed to absorb the surplus of meat, butter, fruits and other foods. In addition it is making large purchases of Australian wheat. Australia's primary industries will thus be assured a certain measure of stability which will assist in counteracting the effects of heavy taxation on manufacturing enterprises other than munitions works. The Government has also taken strenuous measures to preserve equilibrium and avoid inflation. A Price Control Commission is functioning under the famous economist, D. B. Copland; the disposition of gold and foreign securities is controlled by the Treasury; and a special Economic Cabinet of leading officials is seeking as far as possible to preserve a 'pay as you go' policy and to avoid excessive foreign borrowing.

The New Cabinet.

Perhaps fortunately for Australia, a youthful and vigorous Government was in office to parry the shock of war. With the death of Prime Minister Joseph A. Lyons on April 7, the country lost an experienced and beloved leader who had guided it from the unprecedented economic crisis of 1931-32 to a high level of prosperity. In the maneuvering for the succession to power, the coalition of the United Australia and Country parties which had governed the Commonwealth for fifteen of the last seventeen years fell apart, over personal as much as political disputes. After a brief interregnum, a new Cabinet drawn exclusively from the United Australia group was sworn in on April 26, with Robert G. Menzies as Prime Minister. The new Premier, who is less than forty-five years old, had a difficult time in managing the House of Representatives, where the Government party held only 26 seats, the Country party 17 and Labor 29. Since it feared a loss of strength if an election were held, however, the Country party refrained from combining with Labor to vote the Menzies cabinet out of office.

Legislation.

Prime Minister Menzies had risen rapidly in Australian politics and had greatly increased his popularity with the electorate by his protest resignation from the Lyons cabinet in March. The occasion for this act was a Government announcement that the contributory pensions provision of the national insurance scheme adopted in July 1938 would be abandoned and replaced by a system of health insurance at lower cost. But the heavy burden of defense expenditures made Government contributions impossible, even on a limited scale, and the entire scheme has been shelved for the time being. Instead, during his term of office Mr. Menzies has stressed external policy. The Commonwealth's preoccupation with defense has been motivated as much by dangers arising from Japanese activity in the Pacific as by conditions in Europe. The Prime Minister therefore announced on April 27 that Australian legations would be established in Washington and Tokyo; and at the end of the year it was authoritatively stated that R. G. Casey, Treasurer and Minister of Development in the Menzies Government, would go to the United States as the Commonwealth's first diplomatic representative there. Thus Australia assumes a position in the East commensurate with its strategic and economic importance.