The Second World War was far more destructive of the global economy than the First World War had been. At the end of the war in 1945, there was no international economy remaining, and in most respects it had to be recreated. Moreover, there was little enthusiasm for putting back the clock, as there had been after the Great War. This led to the creation of new international institutions that were designed to avoid the worst problems of the previous decades. The strength of the international economy, however, rested on the domestic outcomes in the major economies – on how well they would be able to reconstruct and rebuild, and on whether sustained economic growth, full employment and rising living standards would be delivered as promised. In addition, the world now faced a new division between communist East and capitalist West, and it remained to be seen how the Cold War would impinge on both sides of this ideological divide.

The industrial economies outside North America experienced great shortages of foodstuffs and raw materials at the end of the war, some of which could be supplied by imports, as long as the mechanisms of international trade and payments were rebuilt, and there was adequate international shipping available. International prices for primary products soared, including those commodities exported by Australia. The international crisis in Korea in 1950 added a further spiral to these prices (for example, wool – as shown in Figure 7.1). This created potentially auspicious conditions for countries like Australia, which could meet some of this international demand. Indeed, in the late 1940s and early 1950s, primary-producing countries faced the most favourable international demand conditions for many decades. How long the high primary produce prices would last and how well primary exporters would be able to take advantage of the boom were significant questions in the post-war era.