STRATEGICAL APPRECIATION IN RELATION TO LOCAL DEFENCE-THE EFFECT OF THE POSSIBLE OCCUPATION OF THE NEW HEBRIDES AND NEW CALEDONIA BY JAPAN
(The three Chiefs of Staff were present for the discussion of this subject).
Consequent upon a press report that the probable peace terms to be imposed on France by Germany and Italy would include allotment to Japan of the New Hebrides and New Caledonia, the War Cabinet consulted the Chiefs of Staff in regard to the possible courses of action that might be taken.
The Chief of the Naval Staff  pointed out that a condominium existed in the New Hebrides, and failing the continuance of French participation it was assumed that the British would remain in sole charge. New Caledonia, on the other hand, is a purely French possession. The Chief of the Naval Staff advised that should the Commonwealth decide to carry out a military occupation of these islands it would be unable to hold them against Japanese action, because of the superior sea-power of Japan.
The Chief of the General Staff  feared that the occupation of New Caledonia might give the Japanese a precedent for seizing the Netherlands East Indies, though the same deterrent to action, in the shape of the United States Fleet, might exist in this case also.
Reference was then made to the possibility of invasion of Australia by Japanese action, and whether action should be taken to reinforce Darwin and Port Moresby.
The Chief of the Naval Staff stated that, if Japan should come in and U.S.A. should not, there would be no point in holding Darwin, and the naval oil supplies there should be drained in such a contingency. The whole position in regard to the defence of the northern part of Australia hinged on a battle fleet based at Singapore. If such was not possible, the situation became radically changed.
The Chief of the General Staff was of the opinion that Japan's attack would be against British naval forces and bases, and with their defeat and capture Japan could bring the Commonwealth to terms by the exercise of sea-power alone, without the need for invasion.
Questions were then raised as to the scale of attack against which preparations are being made by the Australian Defence Forces. The Chief of the General Staff stated that the provision of munitions was being based on the minor scale of attack, plus the requirements of the A.I.F. Figures on this basis had been furnished to the Director-General of Munitions  as an indication of the initial requirements of the Army, and not as a final statement of objectives. The latter would be furnished when the Director-General had commenced production.
The Prime Minister  pointed out that the basis of the Government's defence measures in peace had been the continual development of an effective policy, the first objective of which had been laid down by the Government's advisers as the completion of the defence against the minor scale of attack. Some time before the war a programme for the expenditure of 43,000,000 had been approved. This had subsequently been increased to 63,000,000 and expanded to greater dimensions after the Munich crisis. The present position in regard to the Services was that the Navy had in commission all the ships that we could obtain or build. The strength of the Army for local defence was being increased to 250,000 men. The Air programme was based on the early completion of the Salmond Schemes, plus our contribution to the Empire Air Scheme. In regard to munitions, the Director-General had been informed that the sky is the limit and time is the essence of the contract. He had a mandate for the production of the greatest possible quantity in the shortest possible time.
It was generally agreed that the Services and the Munitions Department had been set maximum objectives. It was also decided that the Prime Minister should despatch an urgent cablegram to the Dominions Office regarding the New Hebrides and New Caledonia.