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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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8 National Development and the Sterling Bloc, 1951–52



National Development and the Sterling Bloc, 1951–52

“Under present day conditions we are forced increasingly to look to the United States.”1


While Australian economic interests shaped its diplomatic and security objectives, its economic policies also increasingly diverged with Britain. Economic development was the central policy of the Menzies government.2 But ongoing growth required capital investment. Despite pursuing development, the Chifley administration had looked to Britain and reluctantly accepted the limitations of its reduced economic capacity and the restrictive Sterling bloc.3 The Liberal-Country government rejected this bottleneck. It viewed Australian expansion as a national security issue and, as with the ANZUS Treaty, sought American assistance: U.S. investment for development. Eventually, this need of dollars involved pushing for the relaxation of Sterling controls to increase dollar investment in Australia and, in the longer term, diversification of trade towards the faster-growing Asian and American economies. It increasingly put Australia in conflict with Britain, which wanted Australia in its traditional role: producing and exporting primary produce.

The British Board of Trade opposed the Australian development policy. It disparagingly observed that the Menzies administration was “single-mindedly determined” to increase Australia’s population and, on strategic grounds, expand its manufacturing capacity even more quickly than its population. “In consequence, all Australian political and official thought was dominated by the Development Programme.”4

Economic historians have recognised the Menzies government’s prioritisation of development and rejection of the restrictive Sterling bloc.5 But these...

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