FROM PEACE TO WAR
Australia is at present faced with the problem of diverting resources from production for peace to production for war. Some reduction in the standard of living appears to be inevitable, since maintenance on this may not be consistent with the most vigorous war effort. It is important that entrepreneurs should understand that many of the industries which will expand now may be unable to compete successfully with oversea producers after the war. The Government has already taken steps to control many aspects of economic activity but co-ordination is essential. It isnot i sufficient to prevent private enterprise from using resources in a manner not suited for a war-time economy ; the Government must also see that the resources set free are actually re-employed in the best manner.
However, " Australia enters the war with a strongly organised economy." The level of London funds must be considered sound and there is still a wide margin for taxation and borrowing for war purposes.
During the year bank deposits rose by £2.1 millions, London funds and Australian liquid assets fal:irg, whereas advances rose £7.3 mil- lions to meet the increased demands of primary producers. The ratio of advances to deposits was 93.3 per cent. If export income increases during the war, the strain of financing primary produc- tion will be relieved. Otherwise, a heavy reduction of imports or a continuation of central-bank expansion will be necessary and both introduce problems of their own which do not arise from an improvement of export income.
The Stock Exchange remained moderately steady in the face of international tension, but investors were cautious. In general, company profits no longer continued an upward trend, and in some cases were lower. The yield on 4 oer cent. Government securities rose from 3.8 per cent. in October, 1938, to 4.1 per cent. in September, 1939.
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