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Australia subscribes to the second view. It appears to us to be quite impossible to reduce costs and standards to an indefinite extent without social and economic disaster. We do not believe that the peoples of the world can be induced to accept the further drastic reductions that would be necessary. An attempt to effect them would have results that one scarcely cares to contemplate. If such reductions are to be effected, they would have to cover interest, capital and every form of wealth in addition to reductions of wages and the living standards of the workers. Australia unhesitatingly holds the view that the idea of reduction to the basis of present price levels must be rejected and every effort must be directed towards bringing about an increase. The question that confronts us is how this can be done. Again we have two schools of thought. One is composed of those who say that nothing can be achieved by any group of nations, however large, operating on its own internal economy and that by international action of a general character only can success be achieved. The other school is composed of those who say that action by a large group can effect its own internal price level and that such action would force those outside the group to take similar action, thus paving the way to a complete solution. In order clearly to set out the position as Australia sees it, it is desirable that I should give to the Conference the story of how the fall in commodity prices has affected Australia, the actions that we have taken to meet the crisis that has confronted us, and what our present position is. A Higher Price-Level and Stable Exchanges Among the first signs of the coming depression was a heavy fall about the middle of 1928 in the prices of certain raw materials and food stuffs. The fall has since affected almost all commodities, though unevenly, Australia's main exports being hit early and severely. The prices of Australian exports were reasonably stable from 1925-26 to 1927-28. Even then they were about 27 per cent below the peak reached in 1924-25. The sharp decline which began in 1928 has continued ever since, with little intermission. A given volume of exports from Australia is now worth in gold only 32 per cent of what it was worth in 1927, 44 per cent in sterling and 57 per cent in Australian currency. It is a truism that a heavy fall in prices makes difficult the payment of all debts. The debtor must hand over more goods to meet his fixed obligation. For instance, the fall in the prices of Australian exports means that the quantity of them needed to pay interest on our external debt is increased by over 100 per cent. Our position has been made worse by the fact that in Australia export prices have fallen much more than those of imports. Notwithstanding the fall in import prices, Australia must send about 50 per cent more exports to pay for a- given volume of imports. In the post-war years up to 1928-29, the financial relations of Australia with the rest of the world were fairly steady. Our exports were worth about £147,000,000 and our imports about the same. Though our interest and sinking fund payments were heavy, amounting to about £30,000,000 per annum, we were, during that period, borrowing heavily abroad for developmental work, our overseas loans being about equal in value to our interest and sinking fund payments. Since January, 1929, it has no longer been possible to raise longterm loans overseas. Australia had to face the task of paying for her imports and meeting her interest and sinking fund payments out of exports reduced to about one-third of their old value, or £48,000,000 gold in an average season. Oversea interest and sinking fund payments in 1931-32 required £30,000,000 out of whatever total of exports our producers' efforts and the luck of the seasons could win. To adjust the economic life of the country to this changed position within two years seemed at the time impossible. Yet it has been done. Exports were increased, imports cut down and the burden of oversea payments lightened. We have even achieved a small margin in our trade balance for the year ending 30th June, 1932. This is not due entirely to our own efforts. Great Britain has helped substantially, partly by suspending interest and sinking fund payments on the War Debt, and partly by her departure from the gold standard. A phenomenal season was the main factor in swelling our exports so that they realized about £64,000,000 in gojd. Maintenance of their average volume would have given us only £48,000,000 gold. By stringent measures we reduced our imports from £151,000,000 in gold to £36,000,000. The war debt moratorium and Britain's departure from the gold standard reduced our oversea require-