GERMANY-QUESTION OF COLONIES
The first part of this memorandum summarised a speech made by the Minister for External Affairs, Sir George Pearce, in the Senate on 13 March 1936 (Commonwealth Parliamentary Debates, vol. 149, PP. 119-123). It then went on to summarise a report on German colonial aspirations by a sub-committee of the U.K. Committee of Imperial Defence. This report concluded that there were strong objections to the transfer of territory to Germany, but that, in view of the desirability of a general settlement with Germany, the possibility of a compromise should be considered. The sub-committee's final conclusion was that 'Germany's desires could not be satisfied in the colonial sphere either politically or economically, and that such contributions as [were] possible in the colonial sphere should be combined with an attack on the wider and more fundamental problems underlying the political and economic discontents of the world'.
The memorandum then listed developments to the end of January 1937 and concluded as in the extract below.
25. There are three considerations which the Minister for External Affairs  would like to stress, as being of paramount importance from the Australian point of view, in this question of colonial territories, and especially late German New Guinea:
(1) It appears to the Minister inevitable, if Germany gets her colonies back, that she will use the argument that the protection of those colonies and the lines of communication to them necessitate a much larger Navy than that allowed her under the present Anglo-German Treaty by which she is limited to 35 per cent. of British naval strength. A denunciation of the Naval Treaty would mean that Germany intended to build beyond the 35 per cent. limits, or even that she was contemplating entering on a naval armament competition with Great Britain, such as obtained prior to 1914.
In either case, it would restrict the effective British naval forces which could be despatched to, or based on, the Far East, in the event of a deterioration of the situation in the Pacific regions, particularly if it coincided with European complications, as it most likely would.
(2) If Germany Came back into the Pacific we in Australia would have her as a very near neighbour. Australia realised the undesirability of this as long ago as 1883 when Sir Thomas Mcllwraith, the then Premier of Queensland, formally took possession of the eastern part of New Guinea. The action was disallowed by the British Government, and shortly afterwards followed by the annexation of the territory by Germany. It should be remembered that Germany was not a good neighbour in the past, and that the German Colony of New Guinea had a disturbing influence on our other near neighbour, the Netherlands East Indies. Moreover, in view of the fact that Germany today represents a most disturbing element in Europe, it is unlikely that her presence at our front doorstep would make for the welfare of the Commonwealth.
(3) The third consideration is the possibility of having naval and military and air force bases, in dose proximity to Australia, in the possession of a foreign power. This was always regarded with misgiving by Australia, and was one of the reasons which prompted the despatch of the New Guinea Naval and Expeditionary Force early in the Great War with a view to removing this menace. The provisions of the 'C' Class Mandates, whereby such bases cannot be established in Mandated Territory, have, from the defence point of view, been of great value to Australia and [this] has tended to preserve the political equilibrium of the Pacific. It was, in fact, recognised as an important element in the 'status quo' provisions of the Washington Treaty.
The return of New Guinea would bring Australia face to face with the conditions prior to 1914, but in an accentuated form owing to the development of the air arm. It is hardly likely that Germany would agree to accept any conditions about demilitarisation if any former colonies were returned, and assuming that New Guinea were returned the possibility of bases there being used either by Germany herself or by an allied Pacific power, would lead to a feeling of constant disquiet and insecurity.
In connection with the air problem, a recent statement attributed to Dr Heinz Orlovius, the Press Chief at the Air Ministry in Berlin, is of particular interest. In a newspaper article Dr Orlovius points out that the development of air routes from Europe to other parts of the world is being governed largely by colonial political considerations. Germany alone, he says, is prevented from competing on equal terms. 'The most superficial observer', Dr Orlovius continues, 'must be struck by the anomaly by which the very country that has reached the front rank of commercial aviation, and demonstrated with distinction its capabilities as a coloniser, is still concerned only as a spectator in the close relationship between colonies and aviation', and he goes on to describe how, nevertheless, Germany has played a large part in the development of air routes in China and Brazil, has organised a service across the South Atlantic, and is now planning a flying boat service between Germany and New York.
If commercial aviation is all that he has in mind, Dr Orlovius tends to refute his own arguments: the political implications of a demand for overseas air bases must not be overlooked. 
1 See Hodgson to Casey, covering note forwarding Conference briefs 9 February 1937 (AA: CP 4/3, bundle 1, item R. G. Casey 2a).
2 Sir George Pearce.
3 Memorandum prepared in Department of External Affairs.
[FA: A 2938, GERMANY. QUESTION OF COLONIES]