<P> The Labor Party soon split into three separate factions . Jack Lang and his supporters, mainly in New South Wales, were expelled from the party and formed a left - wing splinter party officially known as the New South Wales Labor Party, commonly known as Lang Labor . The Minister for Public Works and Railways, Joseph Lyons, led a conservative faction, which believed in the deflationary approach of balanced budgets and cuts in spending and opposed defaulting on debt repayments . When the more radical Ted Theodore was reinstated as Treasurer by Scullin on 29 January, Joseph Lyons and James Fenton along with three others resigned from the government, joining the opposition Nationalist Party to form the United Australia Party . The Australian Labor Party would remain in government through the parliamentary term however, with Scullin as Prime Minister, and except for a brief stint by Scullin, Theodore as Treasurer . </P> <P> The stance of Joseph Lyons and James Fenton against the more radical proposals of the Labor movement to deal with the Depression had attracted the support of prominent Australian conservatives, known as "the Group", whose number included future prime minister Robert Menzies . In parliament on 13 March 1931, though still a member of the ALP, Lyons supported a no confidence motion against the Scullin Labor government . The United Australia Party was then formed from a coalition of citizens' groups and with the support of the Nationalist Party of Australia . Lyons quit the ALP to become parliamentary leader of the newly established United Australia Party, with John Latham, Nationalist Leader of the Opposition, becoming the new party's deputy leader . </P> <P> In November 1931, Lang Labor dissidents chose to challenge the Scullin Labor government and align with the United Australia Party Opposition to pass a' no confidence' and the government fell . At the 1931 federal election, the ALP were left with just 14 seats after losing 32 seats, though an extra 4 seats were won by NSW Lang Labor . The Lyons - led United Australia Party in Coalition with the Country Party commenced its first term of government in January 1932 . </P> <P> Before being voted out of office, the Scullin government had covered NSW's debt default . The federal government had paid NSW's bond installments and intended to recoup this money from the NSW Government . A dramatic episode in Australian history followed Lyons first electoral victory . When NSW Premier Jack Lang refused to pay interest on overseas State debts, the Lyons government stepped in and paid the debts and then passed the Financial Agreement Enforcement Act to recover the money it had paid . In an effort to frustrate this move, Lang ordered State departments to pay all receipts directly to the Treasury instead of into Government bank accounts . The New South Wales Governor, Sir Philip Game, intervened on the basis that Lang had acted illegally in breach of the state Audit Act and sacked the Lang Government, who then suffered a landslide loss at the subsequent 1932 state election . </P>

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