Even before the devastating stock market crash on Wall Street (the centre of stock market trading in New York, United States of America), unemployment in Australia was already at ten per cent. The Wall Street crash in October 1929 signalled the beginning of a severe depression for the whole industrialised world.
After the crash unemployment in Australia more than doubled to twenty-one per cent in mid-1930, and reached its peak in mid-1932 when almost thirty-two per cent of Australians were out of work.
A contributing factor was the visit in 1930 by Sir Otto Niemeyer6 from the Bank of England who visited Australia to advise governments to implement a deflationary policy. Niemeyer contended that wages must be 'depressed' (i.e. cut) to make exports more competitive and to raise profits. Niemeyer advised savage cuts in all existing social services. More significantly Niemeyer demanded that Australia not default on her international loan obligations to Britain. This created great political differences and resulted in the Premier of New South Wales, Jack Lang, being dismissed when he refused to pay the loan obligations.
James Scullin's Labor government, with its internal party disputes and deflationary economic policy, was unable to bring much relief from the Great Depression. By the time his government was voted out in early 1932, Australia had felt the effects of the economic disaster more than other nations around the world.
Even after the Lyons' UAP came to power, recovery in Australia was slow. Under the more conservative rule of