Protecting the sterling area: The chifley government's response to multilateralism 1945–9

Abstract

In 1942 the Australian Labor government accepted multilateralism in the form of Article VII of the Anglo‐American Mutual Aid Agreement. Some historians have argued that this was the beginning of a turning point in Australia's economic history: a movement away from the declining British empire towards the United States. I have two arguments in this article. The first is that Labor's acceptance of multilateralism did not lead, at least in the first five years after the war, to a deterioration in Australia's economic relationship with the United Kingdom. The reverse was true. Because of the acute shortage of dollars in the postwar world, Australia was obliged to expand her trade within the sterling area and to discriminate against American goods. The second argument is that although the Chifley government supported multilateralism as a theoretical concept, it opposed vigorously what it regarded as the Americans’ precipitate moves to dismantle the sterling area. The Chifley government sought to protect this cooperative system of exchange and import controls as a bulwark against the dollar shortage and against the possibility of a depression spreading from America.