(1) I heard confidentially a few days ago that the President  was getting depressed at continuous reverses and had sought advice from his principal advisers as to where a real stand could be made in an area where we (i.e. Anti-Axis Forces) could make ourselves secure in air and on ground, and sea and air lines, reinforcement to which could be ensured. He had the war against Japan principally but not exclusively in mind.
(2) After hearing this, I have seen a number of the President's Senior Service and other Advisers (including Harry Hopkins) and have advanced the view that the mainland of Australia and New Zealand represents the only area that conforms to the President's specification and which at the same time offers hope of eventually regaining areas already lost to Japan.
(3) I have said that the United States forces already in and en route to Australia represent formidable vanguard to above end but that a great deal more will be necessary if we are to avoid continuance of slow retreat southward in face of superior Japanese forces.
(4) (I may say that the information confidentially available to me here regarding Wavell's  chance of holding Java is very pessimistic.) (5) Considerable discussion is going on in high places here arising out of contents of paragraph 1 above and (probably quite independently of any representations of mine) prominent in these discussions is the proposal that United States should make itself responsible for the formidable reinforcement of Australia and New Zealand (additional to what has gone and is going) particularly with mechanised forces (aircraft, tanks, antiaircraft and field artillery etc.); and pressing Britain to undertake similar additions to Burma and India. Above division of responsibility not to be exclusive, i.e. United States would probably undertake supply of bombing aircraft to India as well as to Australia.
(6) Harry Hopkins asked me privately today whether if such a proposal was agreed upon and if United States undertook to send forces of a stated (and considerable) strength to Australia, Australia was likely to agree to two Australian divisions from Middle East being diverted say to India or Burma, which President naturally regards as of very great importance to hold. He prefaced this by saying that this was on assumption (which lie hopes will not come about but which looks possible now) that it turned out to be inadvisable when the time came to land them in Java. I said that of course I could not answer this question but that I would pass it to you at once.
(7) Subject matter of paragraph 5 above  was of course not a formal request but for his own information as one of the small group of senior individuals considering general subject matter of this telegram. Any reply to this query that you may care to send me would be treated [as] completely confidential.
(8) Shipping is definitely the main problem in respect of any substantial reinforcement to Australia, although Hopkins believes that by being ruthless it can probably be got together. I do not think he was speaking without [sic] any precision but he used the figures at one stage 150,000 or 60,000 troops with their equipment'.
(9) I fully realize that shipping at present allocated to the transport of Australian cargoes from United States to Australia is fully engaged in carrying material of a varying, although generally high average, of priority. However, it occurs to me that it would probably be extremely helpful to the above large project if we were able to say that, notwithstanding the urgency with which we need the goods now allocated to the above-mentioned shipping to Australia, we are willing to forgo (as a contribution towards problem of shipping the equipment as apart from personnel) several thousand tons (a figure to be stated spread over say next six weeks) of our contemplated cargoes in favour of carrying an equivalent tonnage of weapons and equipment for contemplated American forces.
(10) I have consulted McCarthy  on paragraph 9 above. After reviewing the sailings already listed and cargoes coming forward to fill them, he believes that it would be practicable for us to contribute about 25,000 tons deadweight during the month of March, without sacrificing vital war materials such as aircraft, tanks, lubricating oil, machine tools and materials for munitions manufacture. The main items of cargo displaced would be wood pulp, sulphur, lumber, newsprint and the like.
(11) Grateful for earliest possible reply as I believe this matter will be decided within very few days.