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Rethinking the Australian Dilemma

Economics and Foreign Policy, 1942-1957


Bill Apter

This book explains how and why, Australian governments shifted from their historical relationship with Britain to the beginning of a primary reliance on the United States between 1942 and 1957. It shows that, while the Curtin and Chifley ALP governments sought to maintain and strengthen Australia’s links with Britain, the Menzies administration took decisive steps towards this realignment.

There is broad acceptance that the end of British Australia only occurred in the 1960s and that the initiative for change came from Britain rather than Australia. This book rejects this consensus, which fundamentally rests on the idea of Australia remaining part of a British World until the UK attempts to join the European Community in the 1960s. Instead, it demonstrates that critical steps ending British Australia occurred in the 1950s and were initiated by Australia. These Australian actions were especially pronounced in the economic sphere, which has been largely overlooked in the current consensus. Australia’s understanding of its national self-interest outweighed its sense of Britishness. 

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6 Post-War Reconstruction and Economic Choices, 1945–49



Post-War Reconstruction and Economic Choices, 1945–49

“Are we to ignore the plight of the United Kingdom because some temporary customer requires these goods and is prepared to pay dollars for them? Are we to deprive our greatest customer, friend and ally, of these goods?”1


The Chifley government had many reasons to continue its close affiliation with Britain, the Commonwealth and the Sterling Area. However, Australian reconstruction and industrialisation, together with British and Sterling’s weakness, severely tested the Anglo-Australian relationship. This chapter reviews these stresses and the responses of the Chifley government and its advisers. National development was the central policy. This program led to the question of how to pursue this development, and whether Australia could succeed aligned with Britain.

The debate had started before the end of the war. Nugget Coombs, Director-General of the Department of Post-War Reconstruction, warned Chifley of the risks of economic reliance upon Britain. Notwithstanding these warnings, the ALP government chose this alignment despite clear signs of weakness, such as the 1947 Sterling Crisis, and Britain’s potential association with Europe. The politics of anti-Americanism may have influenced Australia’s support of Britain, but ultimately, the Chifley government believed Sterling Area membership was in Australia’s national interest. The result was that the Chifley government continued to discriminate against America and support Britain. It even reintroduced petrol rationing as a dollar-saving measure despite its political unpopularity. The Coalition made abolition a principal issue in...

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