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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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7 Percy Spender and the Interconnection of Economics and Foreign Policy, 1949–50



Percy Spender: The Interconnection of Economics and Foreign Policy, 1949–50

“The years since the war have demonstrated how interconnected are the political and economic policies of all countries … There should be a similar interconnexion in our own foreign policy.”1


Robert Menzies’s Liberal-Country Party Coalition won the December 1949 election. While, like its predecessor, this government put national development at the centre of its policies, its means to achieve this differed. It focused on building both diplomatic and economic ties to America, even at the cost of its traditional relationship with Britain. Menzies appointed Percy Spender as Minister for External Affairs. Although he was only minister for some sixteen months before becoming Ambassador to the U.S. in April 1951, Spender played a critical role in Australia’s realignment to America and eventual separation from Britain. This reorientation included the negotiation of the ANZUS Treaty, pursued by Spender in the face of British opposition. This agreement, between America, Australia and New Zealand, providing for mutual aid against aggression, was signed in September 1951.

This chapter considers Spender’s approach to foreign affairs and, in particular, his belief in the connection between diplomacy and economics. Although, as explained below, Spender reflected on the paradox of Menzies’s pro-British views and statements and his government’s pro-American policies, this has been less analysed. The ongoing absence of economics from Australian foreign policy history is an essential factor in this neglect, and it is particularly...

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