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Cyclical Fluctuations in
Lecture by Dr. Wilson
At the University last night, under the auspices ? of, the Workers' ' Educational Association,' Dr. Roland Wilson, B. Com, D. Phil., continued his course of lectures ion "Australian Economic Problems." The lecturer concluded his discussion ot "Cyclical Fluctuations in Business," dealing with methods of measuring busU ness cycles, and giving a brief outline of their history .in Australia since 1870.
. Business cycles .were known long be-
fore they were measured, tho lecturer, stated. In examining the influence of cycles, and endeavouring to find out their causes, the first essential was to have a statement of the facts upon which all could agree. Having the facts, we could then proceed to classify and arrange them, to measure them, and re- view the relationship of this particular set of facts to other phenomena. When the general relationships were establish- ed, we then had material on which to base our. interpretations and analyses of the casual factors.
In dealing'with business cycles, the lecturer continued, only a detailed study of each cycle could bo adequate, as ono cycle differed in many important re- spects from another,' but from many points of view lt was desirable to get a bird's-eye view of the general course ot business-over a long-period of years. To this endi economists had developed two methods of concise statement: (a) In- dividual or composite statistical In- dexes," which'rose-with good trude, and fell with poor trade, and (b) business annals, extending over a'period'of years Each method was. necessarily inade- quate, but the one .could be used as a partial check on the other, arid each was valuable Independently, for special .pur-
In order to compute,an index of busi- ness conditions, said Dr. Wilson, it was necessary to take out a number of statistical series representing various elements in the business situation, and subject them to various processes of re- finement. Some of these refinements consisted in tho removal of the'influ- ence of normal seasonal fluctuations from the figures, and the measurement of each observation as a percentage de- viation above or below the long-period trend of the figures. In some countries a single series treated in tills way, us, for example, an index of unemployment or of the physical volume of production, often proved to be a good general in- dicator of the course of business condi- tions. In other countries, however, it was necessary to average a 'number of such series in order to get a represen- tative index applicable to general busi- ness- conditions. When averaging was necessary, each series had to be "com- pressed" or "expanded" in some way in order that each series should have a roughly equal Influencé on the average. Mathematical "correlation" bf each in- dividual series with the composite In- dex was then used in order to ascertain how far all the series tended to fluctu- ate together. Where it was found that
one tendea to fluctuate regularly, before the others it might bo found useful, as a means of forecasting fluctuations . In general business activity.' - lt was on some such system that most of: the mod- ern forecasting agencies operated.
Business annals, on , the . other hand, continued the lecturer, consisted of short literary descriptions, "50-100 words in length, of .business conditions each year. They were useful - in sketching in . the general situation, of which the statisti- cal indexes showed certain parts in de- tail. They were based very largely on current periodicals, reports, newspapers, trade journals, and year books; and so tended to show what was the state of business opinion at the time.- Though literary in form, % they . were easily handled and supplemented the. Indexes, while they could be'subjected to statis- tical analysis ot.various kinds. For ex- ample, cycles In different countries could be easily compared, and they could 'be arranged easily In conspectus form.
AUSTRALIAN INDEXES AND
Little: work had as yet been done in measuring Australian . cycles, said,-Dr. Wilson, but he had been ,able to com- pute an index- for Australia for the period 1870-1022, and the American, Na- tional Bureau of Economic Research had compiled annals for Australia' for tho ?period 1890-1925. In Queensland "Mr. J. B. Brigden was at present working on an index of current business conditions in that State.
His own index, said tho lecturer, be- gan with a state of depression In 1870, but gradually rose to a peak in 1874. It was followed by a very gradual decline to 1881, and then rose sharply, to an- other peak In 1883. A rapid decline: fol.
lowed, reaching bottom In 188(i, and ris- ing sharply again to a -peak in 1889. Thereafter the index showed very much the same results as the annals.
The' period 1890-1925, the lecturer continued, might be summarily describ- ed as:-Depression 1890-95, with a panic In 1893. and a slight revival in 1896; Re- vival 189G, growing into prosperity, 1897 1900. Recession 1901. growing 1902, into depression in 1903. Revival 1904. grow- ing 1905. into prosperity 190G-07. Re- cession and depression 1908, with a rapid revival and prosperity 1909-12. Mild re- cession 1913; revival, recession, and de- pression in 1914. Revival, came nt tho end of 1915, and war activity 1916-18, ending in prosperity 1919-20. Recession at tho end of 1920, depression in 1921, slow revival 1922 to mild prosperity in 1923. Mild recession followed in 1924, with a revival and prosperity in 1925.
AUSTRALIAN AND BRITISH*CYCL*ÊS
Business cycles In England and Aus- tralia, concluded Dr. Wilson, were fair- ly Intimately related. This was due to our trading relations with England, our borrowing policy, and our efforts to maintain parity of exchange between the British and Australian currencies. Tho relations were easily traced In the Indexes and annals of the two countries. Thus, thc Australian Index and a'simi- lar British index were corrleatcd to the extent of .78 (Pearsonian coefficient), though tho Australian Index displayed some tendency to lag behind the fluctua- tions of the British index. Comparisons of thc two sets of business annals show- ed a similar correlation.