Commonwealth Government have given very careful consideration to cablegrams Nos. 262, 263 and 267 and Z.214.  They appreciate the statement on the military situation generally and the comprehensive summary of the strategical appreciation on the Far East situation. I would express the Government's thanks for the assurances regarding the naval dispositions that would be made to provide for our security against invasion.
ARMY 2. With particular reference to paragraph 7 of No. 263 in which the request is renewed for the despatch of an Australian Division to Malaya, the Commonwealth Government desire to assure the United Kingdom Government of their willingness to co-operate with the despatch of the 7th Division to the theatre in which it can render the most effective support. It is realised that considerations of training and equipment preclude its despatch to the Middle East at present, although the intention ultimately to concentrate the Australian Army Corps in this region has been noted. We would prefer that the 7th Division should go to India to complete its training and equipment and to relieve for service in Malaya troops who are better equipped and more acclimatized. This view is supported by our Service advisers and the Government would add that the considerations of wider scope for training and greater occupation of interest, difference in climate, and a less circumscribed role than that of garrison duties at Singapore would be more compatible with the psychology of the Australian soldier.
3. It is realized, however, that there are other aspects of the considerations we raise of which transport and movement of two divisions are not the least. Therefore should the United Kingdom Government still desire that the 7th Division should proceed to Malaya after carefully weighing the views, to which we attach great importance, we are quite agreeable to this course.
4. By the end of September the Divisional troops, 20th and 21st Infantry Brigade, will have attained a sufficient standard of training to justify their despatch overseas. The provision of special clothing, mechanical transport and other equipment would possibly delay their departure until mid-October at earliest.
5. The 26th Infantry Brigade has only recently been raised and it is unlikely to be ready for despatch overseas until December, 1940.
6. The Corps troops and ancillary services which will be necessary to maintain the Force can be provided from existing A.I.F. units in Australia and these could be ready for departure by mid- October.
7. This Force can be equipped from local resources on a modified scale, and this will entail the despatch of items of equipment such as field artillery and light machine guns. These cannot be replaced from local manufacture before March, 1941. It is considered that, in existing circumstances, the despatch of such equipment can be justified.
8. Anti-aircraft equipment and anti-tank guns cannot be provided.
9. If the above Force is to be maintained from Australian sources we cannot at the same time provide for the maintenance of the A.I.F. in the Middle East, except to a limited extent in certain items such as clothing and stores.
10. It is assumed that the Admiralty will provide the necessary shipping accommodation and escort for convoys with the assistance of any Australian Naval Forces available.
11. The remarks in paragraph 3 of cablegram 267 regarding the importance of concealing the destination of the troops are noted and fully endorsed. The further suggestions of the United Kingdom Government as to the manner in which concealment might be secured would be helpful.
NAVY 12. The Australian naval contribution to the defence of Malaya and the Singapore Naval Base is limited by present dispositions. The Forces remaining in Australian waters are the minimum required for trade protection against possible German-Italian merchant raiders.
Therefore until there is a redisposition as envisaged in paragraph 2 of cablegram 262, no further direct Australian naval support can be offered.
AIR 13. The R.A.A.F. has already despatched to Singapore two General Reconnaissance Land-plane Squadrons (24 aircraft) and one Light Bomber Squadron (12 aircraft); each Squadron Plus 50 Per cent reserve aircraft. In addition, one General Reconnaissance (Flying Boat) Squadron is in England, and one Army Co-operation Squadron, less aircraft and ancillary equipment, has been sent to the Middle East.
14. Having regard to the Empire Air Training Scheme commitment in Australia and the unsuccessful efforts which have been made to date to obtain service types of aircraft from the United Kingdom and America, it is extremely undesirable to reduce the number of service squadrons in Australia below that at present established, which are barely sufficient to meet training requirements for the maintenance of personnel in the five squadrons overseas and Australian air defence requirements.
15. It could be anticipated, however, that in the event of conditions arising under which co-operation with the Dutch in Netherlands East Indies became necessary, two General Reconnaissance (Landplane) Squadrons could be based at Darwin and operate in the Islands, using Dutch aerodromes if necessary as advanced bases. The use of Dutch landing grounds would, of course, be practicable only after staff conversations with the Dutch authorities.
NETHERLANDS EAST INDIES 16. With reference to assumption 3 in paragraph 2 of cablegram No.
263 that we should go to war with Japan if she attacks the N.E.I.
and provided the Dutch resisted, it is realized that should Japan become established in these Islands this would be a considerable step towards neutralizing Singapore as a naval base as it would become vulnerable to heavy-scale attack by land-based aircraft. We are also fully conscious of the effect of the occupation of the Island [s] on the strategic position of Australia and feel that almost inevitably, should such a move eventuate, we would find ourselves at war with Japan.
17. Nevertheless because of the military position in the United Kingdom and the Middle East and the attitude of the U.S.A. it is the opinion of the Commonwealth Government that we should not enter into a binding unilateral obligation to go to the assistance of the Dutch if Japan attacks the N.E.I. It is considered our policy should be to take a realistic view  of such an act of aggression in the light of our military position at the time. It is suggested that, if you concur in this course, the views of the Empire should be put to the United States Government with a suggestion for the adoption of a similar realistic attitude in event of the contingency arising.