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ments for interest to £21,000,000 gold. This left a surplus of £7,000,000 gold, some of which is required for the payment of services and dividends. The real surplus is probably under £4,000,000 and whatever it is, it appears as a much needed increase in London balances. This Australian effort to preserve external solvency in a world of shrinking trade has necessarily intensified and prolonged the depression. The reduction of imports to considerably less than half their old volume is for other countries a serious curtailment of their market. In particular it curtails the market for Empire countries from which more than half of Australian imports are drawn. The increase of 33 per cent in the quantity of exports, which are practically all food and raw material, increases the pressure on markets already well supplied and lowers still further the world prices of these commodities. From the Australian angle, the balance attained this year is precarious, both on account of natural causes and of social and economic conditions in Australia. For two years we have had remarkably good all-round seasons for export production in a country notoriously liable to great variations of climate. A rough generalization is that we get, on the average, one good, one middling and one bad year in every three. The balance attained in 1931-32 was only possible with the help of a particularly good season. An average season would reduce the volume of exports by about 20 per cent and their value perhaps by £10,000,000 gold below the figures reached in 1931-32. A bad season would reduce the volume by 40 per cent and the value by perhaps £20,000,000 gold. It is clear that to meet oversea obligations at the present level of prices will require a considerable intensification of effort even in an average year and in a drought might prove impossible, in the absence of accommodation overseas. The internal adjustment necessary to preserve the fabric of industry has of necessity been difficult. With gold prices for export products at one-third of the old level and with no prospect of reducing costs by so much, many individual producers have had to face an adjustment so difficult that, when exceptional seasons come to an end, a curtailment of production beyond that suggested above must follow. It is desirable that I should give the Committee some details in order to establish the magnitude of the social adjustment already made and the difficulty of carrying it further. The Federal Basic Wage is now down on the average 30 per cent below the high point of 1929, and wages generally have been reduced by 20 to 25 per cent. In conjunction with a reduction of 22 per cent in the interest on internal Government loans, interest charges were reduced generally, either voluntarily or by legislation, to roughly the same extent. Export producers have, however, been unable in many cases to pay even reduced interest and are being carried by banks and merchants. This situation is obviously unstable. In January, 1931, the Australia-on-London rate of exchange, previously held within 10 per cent of par, went to £130. Australian to £100 sterling. This gave the exporter an immediate increase of over 20 per cent in his returns stated in Australian currency. The increase in costs has been much smaller. There has resulted a much needed redistribution of income, helping materially to maintain and even to increase export production. This effect was reinforced last September by the similar depreciation of sterling in relation to gold. The Australian sterling exchange remained for a time at the old rate, so that Australian export prices were, on the average, increased by another 25 per cent, in relation to prices. In December last the Australian rate hardened a little to £125 Australian to £100 sterling, giving the present relation of £100 Australian —£60 gold. These changes have left Australian export prices fairly steady over the last year in face of the continued fall in gold prices. The relatively stable distribution of Australian income thus achieved has been an essential factor in maintaining export industry. These three aids to export production—wage reductions, interest reductions and a currency steadied in purchasing power—have made it possible for the export producer, by drastic economies, to keep going. Some of his economies have been real economies' of lasting usefulness. But his immediate cutting of costs has often been at the expense of depreciation of property or plant. A further element in " keeping going " has been a serious reduction of the farmer's standard of living, accepted in the hope of better times in the future. Othei