Your E.117  and 147. 
(1) I am very pleased to learn of the arrangements which have been made to bring together United Kingdom and United States experts in order to consolidate the two plans together with any other suggestions received. Because of our great dependence on international trade it is particularly important to Australia that agreement should be reached on financial machinery which will take full account of the interests of both creditor and debtor countries.
(2) I have carefully studied the conditions which you suggest must be fulfilled before Australia could participate in any currency plan and would make the following comments.
(3) Your (1) -'Adequate to our needs' must of course be interpreted objectively and the condition might be reworded 'adequate to our reasonable needs'.
(4) Your (2)-In order to remove some ambiguity this might be reworded as follows 'Each member country recognises the international obligation to maintain a high level of employment and to raise consumption to the highest level which can be justified by its resources and productive efficiency'.
(5) Your (3)-I agree that we must get as much pressure on creditors as possible but we must recognise that it may not be practicable to obtain agreement on prohibitive penalties. I feel therefore that your (3) might be altered to read 'Each member country recognises the international obligation to avoid persistent credit and debit balances of payments and the scheme provides measures for exerting reasonable pressure on countries failing to carry out this obligation'.
(6) Your (4)-I consider we should be satisfied with the insertion of your (2) and (3) as amended in the policy responsibilities of members along the lines suggested by Coombs in his draft amendments.  In the event of failure of other countries to carry out these policies Australia would then have good moral ground for obtaining special assistance or for withdrawing without stigma if that course became desirable. I suggest therefore that your (4) should be dropped.
(7) Your (5)-I feel that the only practicable condition here is that no single country should be in a position to dominate the Fund or to veto effective action by it and that your (5) should be reworded accordingly.
(8) I greatly appreciate Coombs' account of discussions with United States experts.  Both the substance and the tone of the representations made by himself and Brigden appear from the report to be very satisfactory. I particularly appreciate his efforts to separate participation from contribution and to enlarge the resources of the Fund. I have only the following comments on specific amendments:-
III. 3 (b)-The proposed participation quota for Australia appears to be about 66 millions Australian. This would be in practice less liberal than the Clearing Union proposal.
III. 6-This may need reconsideration if the contribution is to be small in relation to the participation quota. Our aim should be steadily to reduce the importance and significance of the contribution relative to the participating quota.
V. 1-The reduction of United States predominance might be more easily achieved by lessening the majority required for certain decisions to two thirds and limiting any country's votes to 20 per cent.
V. 8-It would be better not to press the proposed amendment but to rely on our moral right to regain freedom of action if we are faced with difficulties that can be attributed to failure of major economic countries to carry out agreed policies. Any specified time limit may be embarrassing to the debtor in emergency and the specifying of a short period gives an appearance of instability to the whole scheme. At the same time, the normal notice of withdrawal in the second paragraph of V.8 might well be reduced from two years to one year.
(9) With a view to the forthcoming attempt to consolidate the plans the experts here are preparing some brief notes on the major issues which will arise, e.g. capital subscription versus banking principle, quotas, automatic right to a limited exchange depreciation, etc.  Before sending these, however, I should like to have the opportunity of studying the American replies to Coombs' suggested amendments to the Stabilisation Fund.  It should be emphasised, however, that the general framework of the Clearing Union is much more likely to be politically acceptable here than that of the Stabilisation Fund which has the appearance of reintroducing the gold standard. The experts also prefer the Clearing Union approach to the problem because it offers better possibilities of obtaining a more powerful and flexible instrument for the desired purposes.