Research Guide: Sir Otto Niemeyer, GBE, KCB
Sir Otto Niemeyer was a British banker and civil servant who served as a director of the Bank for International Settlements (1931–65) and the Bank of England (1938–52). He is best known for his work overseas in the early 1930s where, as a representative of the Bank of England, he assessed the financial and economic situations of a number of countries. The first of these visits was to Australia in 1930 at the request of the Australian Government and supported by the Commonwealth Bank of Australia.
Niemeyer’s visit to Australia had a significant impact on the country’s economic and political landscape. He was highly critical of Australia’s optimistic attitude and warned that the country was living beyond its means. Niemeyer advised that the governments must cut spending, stop borrowing and balance their budgets immediately. The initial response to this advice was mixed but ultimately Niemeyer’s recommendations were accepted. This led to formulation of the Premiers' Plan in June 1931 that reflected the deflationary response Niemeyer had recommended. Niemeyer’s visit also had an unintended impact on Australia’s political situation, contributing to the political crisis that resulted in the Australian Labor Party split of 1931.
Sir Otto Niemeyer began his career as an Assistant Principal at HM Treasury in 1906. He was given responsibility for the technical control of national finance as Controller of Finance in 1922 and was influential in the introduction of the British Gold Standard Act 1925 which returned Britain to the gold standard. In 1927 Niemeyer was recruited as Executive Director and Adviser at the Bank of England by the Governor at the time, Montagu Norman. He represented the Bank on the Financial Committee of the League of Nations as well as playing a leading role in the Bank’s efforts to discover whether new financial facilities could revitalise agriculture and the cotton textile industry. He is most well known for his work overseas where, as a representative of the Bank, he studied and evaluated the financial situations of several countries offering advice and recommendations. The first of these assignments was for the Australian Government in 1930.
Australia’s financial situation in 1930
At the time of Niemeyer’s visit, Australia had found itself in a difficult financial situation. The return to the gold standard in 1925 had negatively impacted the value of the Australian pound creating a disparity between Australian and foreign price levels, which affected the volume of Australian exports. The country’s imports began to far exceed its exports with the cost of the continued borrowing being covered by more debt. In 1927 the commodity prices began to fall and the funds from London that Australia relied upon fell, leading banks to restrict their advances. The resulting financial and economic situation contributed to a large federal budget deficit. The Wall Street Crash of 1929 then resulted in a further loss of export revenue and a cessation of borrowing with many countries proceeding to call in their outstanding loans. Australia found itself with a debt that was too large for it to be able to pay off. It was at this point that the Australian Government, with the support and assistance of the Commonwealth Bank of Australia, invited the Bank of England to send Niemeyer to Australia to help determine the necessary steps for Australia to fulfil its financial obligations. This invitation followed a precedent set by a previous Bank of England visit from Sir Ernest Harvey who had come to Australia in 1927 at the invitation of the Commonwealth Bank. Harvey’s visit had been motivated by the Bank’s wish to discuss central banking problems.
Niemeyer’s visit to Australia
Niemeyer arrived in Australia in June 1930 accompanied by an economic adviser, Professor TE Gregory of the London School of Economics, and an assistant from the Bank of England, Richard Kershaw. After speaking with senior officials and the heads of the banks, Niemeyer presented his findings and recommendations at the Melbourne Conference of Commonwealth and State leaders on 21 August 1930. Niemeyer held the strong belief that Australians were overconfident and too optimistic about their country’s future. They were living beyond their means with both living standards and wages too high and now the ‘cold hard facts must be faced’. His advice was that wages must be reduced, the Australian Loan Council must not raise any further loans overseas until existing short-term loans had been dealt with, and that government must cut their spending, stop borrowing and balance their budgets.
Effects of Niemeyer’s visit
The initial response to Niemeyer’s recommendations was mixed, however, the state premiers and the Prime Minister, James Scullin, did agree to the recommendations. Niemeyer left Australia shortly after the conference and went on to assess the financial and economic situations of a number of other countries including Brazil, Greece and Argentina. He continued to be kept updated on Australia’s response to his recommendations by Sir Robert Gibson, Chairman of the Commonwealth Bank, who had impressed him during his visit. Gibson informed Niemeyer of the unintended impact his recommendations were having on Australia’s political landscape. The conflicting opinions within the Labor Party on whether to follow Niemeyer’s advice were contributing factors to the political crisis that resulted in the Labor Party split of 1931. A decision on whether to follow the recommendations was eventually reached through the formulation of the Premiers' Plan in 1931 which acknowledged the dissenting opinions while still reflecting Niemeyer’s deflationary advice.
Another outcome of Niemeyer’s visit was the commencement of the ‘Niemeyer Statements’ that were monthly statements of Commonwealth Government financial transactions. He was also responsible for recommending the appointment of Sir Leslie Melville as the Commonwealth Bank’s first economic adviser.
This information is drawn from records held by the Reserve Bank of Australia Archives and the following external sources:
Clark M (1993) ‘Book Six: “The Old Dead Tree and the Young Tree Green” 1916–1935: An Australia in the Palace of the King-Emperor’, Manning Clark’s History of Australia: abridged by Michael Cathcart, pp. 522–531.
Millmow A (2004) ‘Niemeyer, Scullin and the Australian economists’, Australian Economic History Review, vol. 44, no. 2, pp. 142-160.
Correspondence with Niemeyer and documents regarding his visit to Australia and subsequent missions to assess country’s economic and financial situations can be found in the London Letters.
In addition, the following materials are not currently available on this site, but are available on request. To request to view these materials please contact the Archives.
- S-e-7 Secretary's Department - Bank of England - Niemeyer, Sir Otto - Visit to Australia
- S-c-52 Secretary's Department - Bank of England - Visit to Australia - Sir Otto Niemeyer
- A range of Statements of Consolidated Revenue & Expenditure Accounts (Niemeyer Statements) and related papers covering the period from 1930 to 1972