Your SFC38.  The following comments are made on your reply:-
Paragraph 1: Noted.
Paragraph 2: Following the review of the manpower position in February, the Prime Minister announced that a further reduction in the strength of the Forces was not possible, but promised to review the position again in June. In view of the end of the war in Europe and announcements by other countries of the reduction of their Forces, the demand for a statement by the Government of its intentions would not permit of any further delay.
The day prior to my announcement of the reduction, the Government faced a motion of censure which referred to the housing and food production situations which are largely questions of manpower. The review had been made and the decisions reached at a most opportune time. They have been received with general satisfaction, the few criticisms being directed to the fact that the reduction does not go far enough or that the decisions are rather belated.
As will be noted from the factors mentioned in the reply to paragraph 3 (a), it will take some time to give effect to the reductions announced and contemplated. It is therefore a matter of supreme importance to the Government that the authorities in Washington and London should be acquainted with the Government's decisions and their agreement obtained as requested in the previous cablegram.
It was the view of both War Cabinet and the Advisory War Council that a war effort of the dimensions outlined in paragraph 13 of cablegram No. 85  was a contribution which, with our past record, should guarantee the attainment of our objectives in the peace settlement.
Paragraph 3 (a): The Defence Committee, in association with the Commander-in-Chief, have been requested to submit their recommendations on the future organisation and strength of the Forces that should be maintained after the end of the next phase of operations and after providing for the present special releases and future additional reductions entailed in reaching the objectives of strength referred to in paragraph 13 of cablegram No. 85.
The plans for the reduction of the Forces and the absorption of discharged members in the civil economy are to be based on the realisation of the reduced strengths as soon as:-
The operational plans will permit.
The re-organisation of the Forces can be carried out.
The orderly re-settlement of discharged members can be planned and arranged.
Paragraph 3 (b): The Defence Committee has been requested to submit its recommendations on the monthly intake for the services necessary for the maintenance of the reduced establishments. The Defence Committee is also to report on:-
(1) The merits of continuing recruitment in view of the time that will elapse before recruits can become trained soldiers. This also has a bearing on the maintenance of training establishments.
(2) The likelihood that numbers of members of the Forces might prefer to continue to serve in any garrisons and forces of occupation which may be maintained.
(3) The case for the continued recruitment of women for the services, if this is still desired.
Paragraph 3 (c): See answer to 3 (b).
Paragraph 3 (d): In furnishing the report referred to under 3 (a) the Defence Committee is to have regard to the following observations by War Cabinet:-
'The present approved operational strength of the Army is 6 divisions and 2 armoured brigades, and the authorised objective of the R.A.A.F. is 53 squadrons. In addition, there are approximately 19,999 R.A.A.F. personnel serving abroad (including 3,655 missing and prisoners of war).
In the future organisation and strength of the Forces, a relativity is to be maintained between them from the aspects of a balanced war effort and a balanced post-war Defence Policy.
The R.A.A.F. personnel serving overseas are additional to the strength in the Southwest Pacific Area and, on repatriation, this number should, in principle, be discharged. The Defence Committee is to report on the effect of the repatriation of the members of the R.A.A.F. from overseas in relation to the R.A.A.F. strength and intake in the Southwest Pacific Area.
In considering the organisation and strength of the Air Force, the Defence Committee is to have regard to the reply to be furnished by the Department of Air to the Acting Minister for Defence on the following questions raised in his letter  of 30th April, 1945:-
The strength which should be provided for participation in the forces of occupation in Europe.
The strength which should be provided for participation in the very long range Task Force in the Pacific.
In view of the stage of the war and the manpower position, should the strengths of these forces be additional to or included in the future authorised strength of the R.A.A.F.' Paragraph 4: The tentative composition of the operational forces, totalling three divisions, referred to in paragraph 13 of cablegram No. 85 would be as follows:-
(I) Two infantry brigade groups for New Guinea and the Solomons referred to in paragraph 8.
(II) A division of three infantry brigades, including one in reserve for the containment of the enemy force in the Gazelle Peninsula in New Britain.
(III) This leaves one division and one infantry brigade. The division would be the Expeditionary Force component referred to in paragraph 17, which would be assigned to General MacArthur, in accordance with paragraph 18, for the forward offensive against Japan. The size of the token force assigned to the South East Asia Area for association with the forces allotted for the recapture of Singapore remains to be determined, but it would probably not exceed a brigade.
It will be noted from (III) that one division only is assigned to General MacArthur for the forward offensive against Japan. The point in paragraph 7 of cablegram No. 85 is that the reductions will be prejudiced if there is a prolonged commitment for the two divisions in Borneo.
Paragraph 5: Noted.
Paragraph 6: Noted.
Paragraph 7: See answer to paragraph 4.
(I) General Blamey attended a meeting of War Cabinet and the cablegram was agreed to by him before despatch.
(II) The views of the Government in paragraph 7 of cablegram No.
85 are based on General Blamey's advice.
(III) The objectives outlined in paragraph 8 are contained in an appreciation submitted by General Blamey  and have been approved by the Government and the Advisory War Council. The views on the reduction of Rabaul are those of General Blamey. General MacArthur has expressed the view that when the time comes to liquidate the Japanese in this area, it would be proper for Allied Forces to be used.
(IV) The decision in paragraph 13 to release at least 50,000 men is a Government one based on its assessment of the needs of the over-all manpower situation.
(V) The tentative objectives of strength referred to in paragraph 13 have been adopted as approved aims of Government Policy. The future Army strength is based on a proposal submitted by General Blamey  for the Government's consideration that, on the basis of the strength of forces likely to be deployed by the United Nations against Japan, the Australian contribution to the Allied effort should be reduced to a total of approximately three divisions. The pegging of the Navy at its present strength is a Government decision in view of the fact that the reduction of 50,000 is confined to the Army and Air Force. The direction on future Air Force strength is also a Government decision. See also Government observations under paragraph 5(d) above.
(VI) The views in paragraph 16 on the future command set-up in the Southwest Pacific Area in regard to the operational control of the Australian Forces on the mainland of the Commonwealth and in Papua and Australian Mandated Areas are those of the Government, which are concurred in by General Blamey.
(VII) The assignment and command of Forces as mentioned in paragraph 17 is in agreement with past practice and accords with the views of Service Advisers.
(VIII) The reasons given in paragraph 18 in support of continuing to be associated with the forward movement against Japan under General MacArthur are those of the Government and are reinforced in one instance by the advice of General Blamey as to what is the popular desire of the land forces.
(IX) The token force for South East Asia Area was proposed by General Blamey, if the Government should desire to assign its main force to General MacArthur as in (VIII). The Government was of the opinion that this would be strongly favoured by public opinion.
The Commander-in-Chief of the British Pacific Fleet has raised the question of the assignment of the R.A.N. Squadron if any change is made and the chief of the Naval Staff favours it. The R.A.A.F.
Squadrons for the R.A.F. Task Force was discussed by the Minister for Air when in London, and the proposal is supported by the Chief of the Air Staff.