(Due to arrive Canberra 22.2.29)
My dear P.M.,
I send out in another letter by this mail copy of Hilton Young's  Report of the East Africa Commission-a bulky document. My object in sending it is not so much for the interest to us of the subject itself, as the possible analogy it may contain with respect to the possibility of some sort of amalgamation of the Administrations of Papua and the Mandated Territory of New Guinea.
Sir Hubert Murray (Papua)  came in to see me yesterday. I asked him in the course of conversation if he thought that the Dutch laid great store on Dutch New Guinea, and he said, to my great delight, that it was his definite impression that they did not and that they would sell it for a song. I hope and trust that you will empower me to sing the necessary song at an early date. But I really doubt whether my voice is good enough.
With regard to the development of Papua, he surprised me by saying that whereas about 10,000 natives are now employed, it is doubtful (on their present information) if more than a total of 20,000 will ever be available. The same order of figures applies to the Mandated Territory. If these are anything like correct, then mechanical aids to development will be essential. This movement is practically non-existent at present as there are probably not half-a-dozen tractors in the whole of Australian New Guinea.
Is it impossible to think of mechanical aids to tree-felling, scrub demolishing, road making, in tropical countries? One hears that Henry Ford is developing such methods in the huge areas in the vicinity of the Amazon in South America that he is putting under rubber.
Murray seems to think that there is not very much wrong with the administration of the Mandated Territory, other than that it is carried out by people who are inexperienced. He thinks it essential that Wisdom  should be allowed to come to Geneva to defend his administration before the Mandates Commission.
I send in another letter a map showing the boundaries of Australia as they are specified in the Letters Patent for the individual States. The Constitution lays down no continental boundaries and it is suggested that as the Commonwealth is now an international entity, some consideration of the situation on the part of the Attorney-General might be appropriate.
I attach a circular issued by Rowe & Pitman, a well-known Stock Exchange firm, with regard to Imperial Finance. As you will see, this is the latest form that Davenport & Cooke's attack on our Australian finance has taken.  Cooke is a member of this firm.
It is a clever memorandum and one that is difficult to answer.
I enclose cuttings about the Commonwealth Loan. It is improving to par much quicker than expected.
At lunch with Philip Kerr  this week, he put forward the following stimulating theory. Periods of expansion and prosperity have followed the successive waves of introduction of mechanical and industrial machinery. But up till the War only 500 million out of the world's 1,800 million people have benefited (or been exploited) by the rising tide of mechanisation and industrialisation. The majority of mankind still till the soil in primitive fashion and live their lives untouched by modern processes. The next phase will be the supplanting of the wooden man-pulled plough and its prototypes in backward countries (China, India, Africa, Java, etc.) by the tractor and the rest-with bettered standards of living and increased wealth to swell the markets of the big established producers of the world-England and America. The handful of rice that is all that the native has been able to produce for his own needs will be multiplied, and his increasing requirements (which he will be able to satisfy through his increasing production) will put new life into English and American factories. This can come about but slowly and by virtue of the export of capital for development from Great Britain and the United States. British capital is limited and earmarked to a great extent for home and Dominion development. American capital is abundant and looking for avenues for employment. But America is inexperienced in financing the development and exploitation of backward countries, whilst we have great experience. Co-operation between American money and British brains and experience is indicated and would provide a useful additional link to cement the Anglo-American English speaking entente. The combination would be world powerful. Mond's  'Finance Company of Great Britain and America Ltd.' may represent the first step in canalising American credit through British channels into appropriate fields.
The Americans have given some indication that they do not necessarily want control of the foreign investments into which some of their surplus credit goes. If they have confidence in the British individuals who organise and run the business, and have nominees on the Boards, they appear to be willing, at present at least, to let British brains run the business although possibly American money may be predominant in the enterprise.
Kerr sees the possibility of a new period of prosperity in the coming generation arising out of the development of the backward lands by virtue of the marrying of British direction to American money.
I send a collection of papers on Belligerent Rights with another letter by this mail.
I spoke to Amery  this week about the difficulty of proper consultation with the Dominions on the very complex subject of Belligerent Rights. It is so important and so many sided that it is next to impossible to give a balanced picture of the subject in telegrams and despatches. He recognises this and says that in the event of our being threatened with a conference on the subject by the Americans, he will make every effort to have it postponed until after the next Imperial Conference.
Sir Hugh Trenchard  spoke to me yesterday about the decision, that the Commonwealth Defence Department has come to, to move the Australian Air Liaison Officer from the Air Ministry to Australia House. He thinks personally that it is a retrograde step but he is not prepared to make any representations about it as it is, he says, our business and not his. Although Australia House is close to the Air Ministry, it will be awkward as he (Trenchard), I think quite rightly, will not allow files to go out of the Air Ministry.
I suppose Defence have very good reasons, but it is not obvious to me what benefits will result to offset the fact that it will not be possible for the Air Liaison Officer to keep as well in touch as he was before.
I enclose copy of a despatch from the British Ambassador at Rome regarding the anti-Italian incident at Innisfail. 
I write another letter by this mail drawing attention to the fact that Australian wheat in the last year or so has been shipped in abnormally large and increasing quantities to the isolated island of Guam in the Pacific. This is an American Naval Station, to which there is no regular shipping service from Australia-a fact that rules out the possibility of the wheat going there for re- shipment. In the year 1926/27 the export of wheat to Guam from Australia was roughly 40,000 tons. In the year ended 30th June, 1928, over 82,000 tons went to Guam, and in the three months ended 30th September, 1928, over 33,000 tons was shipped there. The records prior to these dates show no shipments at all. As the population of the island consists of 16,000 natives and 1,000 whites, it is difficult to see what these enormous tonnages are required for. Even if they are building up a reserve for naval purposes, the amounts seem very large.
Winston is absorbed again in the pangs of authorship. He is producing another book called 'The Aftermath'.  It was to a certain extent due to Amery having read several chapters in manuscript and having made some useful suggestions that Winston mellowed to the extent of giving Amery an opening to tackle him about the loan of the 'Discovery' to Australia.
A good impromptu of Winston Churchill's. A Labour member was criticising some action of his, and stopped in his harangue to say severely-'The right honourable gentleman shakes his head, but he must remember that I am only stating my own opinion'-to which Winston said mildly-'And I am only shaking my own head'.
I am, Yours sincerely, R.G. CASEY