The depression of the 1930s had a greater impact on Australia than on most other countries. Australia's experience was, however, broadly similar to those of countries such as Canada and Argentina which also had a high dependence on exports and external funds. There has been a continuing debate over the relative importance of external and internal factors in causing and increasing the depth of the depression in Australia. There is little disagreement that the downturn in the world economy was translated to Australia by falling export prices and sales and by a cessation of foreign lending. It has been argued, however, that unfavorable domestic factors would have caused a marked downturn in any case and thus also contributed to the severity of the depression. These domestic factors were structural problems in the Australian economy created by the high level of tariff protection; the rate of growth of money wage rates in the 1920s; and a slowdown in public investment. These views are tested by simulating a macroeconometric model of the Australian economy in the interwar years. The results indicate that export prices were the major influence in initiating and determining the depth of the depression in Australia. Other factors were of secondary importance. Indeed, the depression can be viewed as an unusual economic fluctuation imposed on Australia's normal business cycle from overseas sources.