Your E.S.17  has been discussed with MacArthur and he is bitterly disappointed with the meagre assistance promised for the Southwest Pacific Area for the performance of the tasks imposed on him by his directive.
2. He points out that the only item of his directive with which he can comply, either now or in the immediate future, is to route shipping in the Southwest Pacific Area.
3. The promised 95,000 American air and ground troops and a firstline American air strength of about 500 aircraft after deducting squadrons for Fiji and New Caledonia, and the one Australian pursuit group to which aircraft have already been allotted, together with the fact that there is no increase in the naval forces, produce a military situation which MacArthur states is not (repeat not) only entirely inadequate to carry out the directive given him but leaves Australia as a base for operations in such a weak state that any major attack will gravely threaten the security of the Commonwealth. Far from being able to take offensive action in accordance with sub-paragraph 4(h) of the directive the forces will not (repeat not) be sufficient to ensure an adequate defence of Australia as the main base.
4. MacArthur cabled to Marshall  on 24th April a statement of Ausralian land and air formations and the dates when they may be expected to be in service and in training and his relative priorities for the delivery of equipment for same. This is based on the statement of requirements of equipment put forward in cablegram No. S.W.21  which he says in confidence he was asked to reduce to the minimum required. MacArthur has endorsed the figures originally submitted by the Australian Chiefs of Staft , but has shown the spread of requirements to June 1942, December 1942 and June 1943.
5. As to the strategic basis of the forces required in the Southwest Pacific Area, MacArthur says there is no need to go further than his directive and points out that the authorities who drew up the directive also determine the disposition of forces and equipment. He assures me that your fears in paragraphs 10 and 11 of E.S. 17  are quite groundless as his own conclusions as Commander-in-Chief are reached entirely independently. He points out that the passages quoted by you as being outdated in the appreciation of 13th March were clearly expressed as forecasts by the Chiefs of Staff on the military position at that date. He adds that the general concept of this appreciation, which was to indicate the forces required for the defence of the various regional areas and for Australia as a whole, still has full validity and his entire endorsement. He says that the same applies to the appreciation of 4th April , but he will base all his own opinions on his own judgment of the military position and what he needs to comply with his directive.
6. MacArthur states he has also pointed out to Marshall that, if the naval forces in the Southwest Pacific could be strengthened by an aircraft carrier, they would be transformed into a powerful striking force, as the enemy at present is particularly vulnerable with many long and weakly protected lines of communication. He has asked me to seek the allotment of a carrier from the Royal Navy in accordance with the original promise relating to the composition of the Anzac Naval Forces, and I have addressed a cablegram to the United Kingdom Government accordingly.  At his request I have also asked for the diversion to Australia, until the return of the 9th Division and the remainder of the 6th Division, of the armoured division and an infantry division referred to in your S.20. 
7. Finally, in regard to the situation in the Southwest Pacific Area, MacArthur states that an additional allocation of shipping on the Australian-American run should be made for a sufficient period to transport immediately the forces and equipment allotted, and to build up the strength required under his directive. The present amount of 250,000 tons is stated by him to be quite inadequate to complete the requisite defence strength, apart from assembling the strength necessary for offensive action.
8. He is of the opinion that Japan will not at present go further west than Burma. His intelligence sources indicate that Japan is drawing back some of her strength in forward areas to defend places which were left uncovered in her quick advance. Her vulnerability is undergoing a transformation and great opportunities are passing through the inaction of the United States Fleet. The main exception to the homeward movement of certain Japanese forces is a heavy concentration in the Mandated Islands, which indicates an intention to push southwards either in the islands to the east of Australia or to Australia. He says that it is ten times easier to get forces and equipment into Australia now than it may be in the near future, and the opportunity should not be lost for ensuring at least that the United Nations can stand firm in this part of the world. He does not hesitate to say that we may be left unsupported, as he was in the Philippines, or any support may be too late, as in the case of Malaya and the N.E.I.
9. MacArthur considers as highly dangerous the many references which have been or are being made to offensive action against Japan from Australia as a base, if there is a reluctance or inability to carry out these intentions which have been referred to in the many communications since the establishment of the ABDA Area. MacArthur says that if Japan is not attacked elsewhere we can certainly look for an attack here. Speaking from the Australian viewpoint, I think that if we were thrown back on the defensive against a heavy attack the effect on public morale might well be disastrous, if it became known that we did not have the forces considered necessary by the Commander-in-Chief for the defence of the Commonwealth.
10. The position may therefore be summarised as follows:-
(i) MacArthur has made representations for the equipment required for bringing to fighting efficiency the land and air forces that Australia has raised or can raise. It is of vital importance that this equipment should be supplied in accordance with MacArthur's timetable.
(ii) He is disappointed with the contemplated allotment of American land and air forces.
(iii) Nos. (i) and (ii) are not sufficient for the defence of Australia as a base, quite apart from building up strength for an offensive.
(iv) You should support the earliest possible provision of (i) and seek a statement of the U.S. naval, land and air forces, together with the equipment for them which it is proposed to send to Australia within the next three, six and twelve months. It is realised that such a programme must necessarily be flexible as conditions change, but it is essential for a coordinated programme between the Australian and American Forces that the Government, as well as MacArthur, should know in order to be able to plan for the needs of the force which we are able to supply.
(v) You should seek the allotment of a greater tonnage of shipping to provide as early as possible the forces and equipment allotted and to build up the strength for offensive action.
(vi) You should support the allotment of an aircraft carrier to the naval forces of the Southwest Pacific Area.
(vii) You should support the temporary diversion of the British armoured division and an infantry division to Australia pending the return of the whole of the A.I.F., if this matter should come to your notice at Washington through the representations to London.
(viii) You should seek an appreciation from the Combined Chiefs of Staff on the total war position in order that the Government and the Commander-in-Chief may be aware of their conclusions and intentions relating to the Pacific theatre and the general strategical basis governing the allotment of forces and equipment to the various theatres and shipping for their transport.
11. It is the decision of War Cabinet that you remain in Washington until more definite information has been obtained on the foregoing matters.