Commonwealth Government have given very careful consideration to
cablegrams Nos. 262, 263 and 267 and Z.214. [1] They appreciate
the statement on the military situation generally and the
comprehensive summary of the strategical appreciation on the Far
East situation. I would express the Government's thanks for the
assurances regarding the naval dispositions that would be made to
provide for our security against invasion.

ARMY
2. With particular reference to paragraph 7 of No. 263 in which
the request is renewed for the despatch of an Australian Division
to Malaya, the Commonwealth Government desire to assure the United
Kingdom Government of their willingness to co-operate with the
despatch of the 7th Division to the theatre in which it can render
the most effective support. It is realised that considerations of
training and equipment preclude its despatch to the Middle East at
present, although the intention ultimately to concentrate the
Australian Army Corps in this region has been noted. We would
prefer that the 7th Division should go to India to complete its
training and equipment and to relieve for service in Malaya troops
who are better equipped and more acclimatized. This view is
supported by our Service advisers and the Government would add
that the considerations of wider scope for training and greater
occupation of interest, difference in climate, and a less
circumscribed role than that of garrison duties at Singapore would
be more compatible with the psychology of the Australian soldier.

3. It is realized, however, that there are other aspects of the
considerations we raise of which transport and movement of two
divisions are not the least. Therefore should the United Kingdom
Government still desire that the 7th Division should proceed to
Malaya after carefully weighing the views, to which we attach
great importance, we are quite agreeable to this course.

4. By the end of September the Divisional troops, 20th and 21st
Infantry Brigade, will have attained a sufficient standard of
training to justify their despatch overseas. The provision of
special clothing, mechanical transport and other equipment would
possibly delay their departure until mid-October at earliest.

5. The 26th Infantry Brigade has only recently been raised and it
is unlikely to be ready for despatch overseas until December,
1940.

6. The Corps troops and ancillary services which will be necessary
to maintain the Force can be provided from existing A.I.F. units
in Australia and these could be ready for departure by mid-
October.

7. This Force can be equipped from local resources on a modified
scale, and this will entail the despatch of items of equipment
such as field artillery and light machine guns. These cannot be
replaced from local manufacture before March, 1941. It is
considered that, in existing circumstances, the despatch of such
equipment can be justified.

8. Anti-aircraft equipment and anti-tank guns cannot be provided.

9. If the above Force is to be maintained from Australian sources
we cannot at the same time provide for the maintenance of the
A.I.F. in the Middle East, except to a limited extent in certain
items such as clothing and stores.

10. It is assumed that the Admiralty will provide the necessary
shipping accommodation and escort for convoys with the assistance
of any Australian Naval Forces available.

11. The remarks in paragraph 3 of cablegram 267 regarding the
importance of concealing the destination of the troops are noted
and fully endorsed. The further suggestions of the United Kingdom
Government as to the manner in which concealment might be secured
would be helpful.

NAVY
12. The Australian naval contribution to the defence of Malaya and
the Singapore Naval Base is limited by present dispositions. The
Forces remaining in Australian waters are the minimum required for
trade protection against possible German-Italian merchant raiders.

Therefore until there is a redisposition as envisaged in paragraph
2 of cablegram 262, no further direct Australian naval support can
be offered.

AIR
13. The R.A.A.F. has already despatched to Singapore two General
Reconnaissance Land-plane Squadrons (24 aircraft) and one Light
Bomber Squadron (12 aircraft); each Squadron Plus 50 Per cent
reserve aircraft. In addition, one General Reconnaissance (Flying
Boat) Squadron is in England, and one Army Co-operation Squadron,
less aircraft and ancillary equipment, has been sent to the Middle
East.

14. Having regard to the Empire Air Training Scheme commitment in
Australia and the unsuccessful efforts which have been made to
date to obtain service types of aircraft from the United Kingdom
and America, it is extremely undesirable to reduce the number of
service squadrons in Australia below that at present established,
which are barely sufficient to meet training requirements for the
maintenance of personnel in the five squadrons overseas and
Australian air defence requirements.

15. It could be anticipated, however, that in the event of
conditions arising under which co-operation with the Dutch in
Netherlands East Indies became necessary, two General
Reconnaissance (Landplane) Squadrons could be based at Darwin and
operate in the Islands, using Dutch aerodromes if necessary as
advanced bases. The use of Dutch landing grounds would, of course,
be practicable only after staff conversations with the Dutch
authorities.

NETHERLANDS EAST INDIES
16. With reference to assumption 3 in paragraph 2 of cablegram No.

263 that we should go to war with Japan if she attacks the N.E.I.

and provided the Dutch resisted, it is realized that should Japan
become established in these Islands this would be a considerable
step towards neutralizing Singapore as a naval base as it would
become vulnerable to heavy-scale attack by land-based aircraft. We
are also fully conscious of the effect of the occupation of the
Island [s] on the strategic position of Australia and feel that
almost inevitably, should such a move eventuate, we would find
ourselves at war with Japan.

17. Nevertheless because of the military position in the United
Kingdom and the Middle East and the attitude of the U.S.A. it is
the opinion of the Commonwealth Government that we should not
enter into a binding unilateral obligation to go to the assistance
of the Dutch if Japan attacks the N.E.I. It is considered our
policy should be to take a realistic view [2] of such an act of
aggression in the light of our military position at the time. It
is suggested that, if you concur in this course, the views of the
Empire should be put to the United States Government with a
suggestion for the adoption of a similar realistic attitude in
event of the contingency arising. [3]