Let us look at what actually happened.
Angus Maddison’s Estimates of Australian Real GDP from Butlin (millions of 1990 international Geary-Khamis dollars)(thanks Lord Keynes)
Year | GDP | Growth Rate
1927 | $34,716
1928 | $34,164 | -1.59%
1929 | $33,834 | -0.96%
1930 | $32,181 | -4.88%
1931 | $32,720 | 1.67%
1932 | $31,878 | -2.57%
1933 | $33,696 | 5.70%
1934 | $34,991 | 3.84%
1935 | $36,424 | 4.09%
1936 | $38,160 | 4.76%
1937 | $40,336 | 5.70%
1938 | $40,639 | 0.75%
Maddison 2006: 452).
Now what was the Premier's plan
The key architect and publicist for the plan, Copland, transposed it into a conceptual framework. It consisted of
- a depreciation of the currency sufficient to restore real income in export industries to 90 per cent of its former level
- a reduction in real wages of 10 per cent
- a general reduction in real government salaries and wages expenditure of 10 per cent
- a super tax of 10 per cent on income from property
- an expansionist monetary policy based on the purchase of government securities by the Commonwealth Bank with a view to maintaining the general level of prices
- a proportionate reduction in rentier income derived from securities (Copland 1934:66–7).
(thanks Alex Millmow)
So after the austere budget of 1931 growth actually contracted ( as it did in the UK).
Why did growth start in 1933?
The large scale devaluation ( an academic by the name of Bernanke called it massive. He co-wrote a paper with a Martin Parkinson.)
As Ralph Hawtrey said a large devaluation would cause inflation.
This gave the authorities two advantages
1) The liquidity trap was no more and thus monetary policy now worked ( this was why he thought the General Theory not necessary unfortunately the UK experience proved him wrong.)
2) real wages fell quite a bit. This helped reduce unemployment
Let us remember the best the unemployment rate got to between 1933 and 1939 was 8%!
So the balanced budget had nought to do with any recovery tepid that it was.
As usual what is written on Catallaxy is entirely incorrect