INDUSTRIAL PROPERTY MARKET RESEARCH

Industrial Property Market Research

Industrial Property Market Research

Introduction

Prevailing Conditions & Major Causes

During 1920/21 widespread deflation in the value of Sydney farms, on average 50%, led to record numbers of farm foreclosures. Banks responded by radically tightening lending policies, effectively ceasing to draw new loans to legitimate customers and businesses. Farm foreclosures weakened the balance sheets of hundreds of rural banks leading to an epidemic of Bank failures averaging 600 per year throughout the 1920s and predominately in the agricultural regions of the Sydney (L B Thomas 1997).

Sharp reductions in Sydney import levels impacted world markets, driving down demand and prices. Worst affected in Australia were primary producers who experienced declines in export values of up to 40% over the period 1929 to 1932 (Gregory & Butlin, 1988: 156). Australia exposure to fluctuations in demand for primary products was exuberated by the relatively high degree of wool and wheat that made up the balance of exports. Both these commodities experienced sharp declines in demand and price, with wheat prices experiencing further downward pressures due to large stockpiles being released onto the international market post 1929, and sold for whatever they would fetch (Schedvin, 1970: 231).

Australia during the 1920s had concentrated investment into the urbanization of the coastal cities, drawing funds away from the rural sector and into industrial and manufacturing areas, World War 1 added further stimulus to this shift. The Australian Government and its public servants were under pressure to commit massive amounts of resources into the creation of urban assets and industry infrastructure such as railways and communication networks.

These were typically funded by loans secured in London, which suffered due to the instability of the London money market. The Australian authorities were reluctant to take decisive action due to political tensions at the time. The problem was further compounded by the mismanagement of loans by some States, most notably NSW. All of these pressures lead to a liquidity crisis, where Australia was unable to secure long-term loans from either London or New York and were forced into a series of short-term overdrafts. By the beginning of 1930, Australia short-term debt had ballooned to Sydney.1m leading to a struggle by avoid default in public interest obligations throughout the depression period (Schedvin, 1970: 321).

Effect on Australian Economy and Financial System

Prior to the depression, Australia had made only desultory efforts to establish a central bank, most notably in 1924 when the National Country Party introduced legislation that replaced the Governor of the Commonwealth Bank with a Board of Directors, vested the bank with control of the issue of Notes, and formalized requirements for the settlement of all cheques via deposits at the Commonwealth Bank.

The Great Depression highlighted the impotency of the powers that had been granted the Commonwealth Bank. With no control of the nation gold reserves, it was unable to maintain the desired exchange rate, it had no control over the lending practices or reserve levels of private banks, hence was powerless to ensure that depositor funds were secure, and ...