Sir Otto Niemeyer,the bankrupt state and the federal system

One of the main myths about Australian political and economic history relates to the intervention in economic policy making in the 1930s by the Bank of England through the mission of Sir Otto Niemeyer. This article argues that Niemeyer's advice was not heeded. Rather, parallels between what he demanded and the Premiers’ Plan were largely confined to the level of rhetoric as part of a strategy to regain access to the London capital market. State expenditures were reduced gradually according to local political calculations and fiscal priorities, and not in step with the timetable set by the Bank of England. Far from weakening and dividing the Australian state, the federal separation of powers led to the gradual introduction of fiscal austerity, as state governments had little option but to maintain their role in complementing capital accumulation and facilitating social legitimation.