PART I-GENERAL

1. The Commonwealth Government has recently undertaken a
comprehensive review of the nature, extent and balance of the
Australian war effort. [2] This has been rendered necessary by
certain strains and stresses which have manifested themselves,
particularly in the field of manpower. Evidence is not lacking
that we have overreached ourselves in some of the commitments into
which we have entered, and have not the capacity to fulfil them
and at the same time meet certain other demands with which we have
been confronted.

2. The outbreak of the war with Japan had a far-reaching effect on
the Australian national economy. The call-up of manpower for the
mobilisation of the Army and the intensification of production of
munitions and other service needs caused a diversion of manpower
and productive resources from non-essential or less pressing
purposes. In short, Australia's capacity in the last resort to
defend itself against invasion became paramount over every other
consideration.

3. A further important result occurred with the arrival of the
United States Forces and the return of the A.I.F. It meant more
people to house, feed and supply, but pressure for the release of
manpower was still being exerted on the industries primarily
concerned with these new obligations. The additional forces
enabled a transformation to be made in the strategy from a
defensive one on the mainland to a defence of the mainland from
the line of the Owen Stanley Range. This change in strategy also
entailed vast demands for works for the Allied Forces in the
northern part of Australia and the adjacent islands. The call-up
of manpower for the Forces, which had been steadily proceeding,
was extended for works purposes. It was quite clear, with the
constant drawing off of manpower to the Forces, munitions and
aircraft production and works, the continual authorisation of new
commitments and the increased demands for other requirements such
as foodstuffs, that the symptoms of inadequate supplies and an
attenuated manpower position would soon manifest themselves.

However, military needs were paramount over all other
considerations.

4. These consequences are now seen in the following directions:-

(i) An inability to provide for the Navy, Army and Air Force an
intake sufficient to maintain the strengths that have been raised.

(ii) A shortage of manpower to provide for the level of activity
in a number of basic industries on which the Australian direct
military effort ultimately depends (transport, power, timber,
minerals, food, clothing, etc.) in order to ensure a proper
balance between the direct military programme and its industrial
basis.

(iii) A shortage of manpower for the production of food for
Britain, and of food and general supplies for rapidly growing
Allied Forces in Pacific Areas.

(iv) The need to make good in rural and many other industries
basic to the war effort the serious accumulation of arrears of
maintenance which has resulted from the loss of manpower, and
which threatens a further deterioration of the position in these
industries.

(v) A demand by the United States Forces for works, goods,
services and civil workers, which it is quite beyond our capacity
to supply.

5. The Government has had before it a statement showing that, of
males aged fourteen to sixty four, 26.1 per cent are in the
Forces, 14.7 per cent in Munitions and War Factories, and 30.7 per
cent in other essential activities. The total of these is 71.5 per
cent, and, according to our last advice, the corresponding figure
for the United Kingdom is 73 per cent. You will appreciate from
this the extent to which we have gone in the organisation of the
war effort. The comparison in regard to the use of women is not
quite so favourable, owing to the limitations on the use of women
imposed by the distribution of the rural population over wide
distances.

6. The Government has considered whether it should sanction a
further regimentation of the civilian economy in order to make
available additional manpower. This would necessitate the
imposition of such drastic restrictive measures as to involve in
Australia a higher degree of regimentation than exists in any
democratic country. In view of this, and having regard to the
effect on morale and on the war effort itself, the Government has
rejected this course.

PART 2-RELEASES OF MANPOWER

7. In the light of the foregoing, and particularly in view of the
need for men and women of skill and experience for the purposes
indicated in 4 (ii) and (iii), the Government has decided to
reduce the strength of the Army and the number of men and women
engaged in munitions and aircraft production. The maintenance of
the services will be governed by the available intake of manpower
and womanpower.

8. The decisions are as follows:-

(i) The Army is to release a net total of 20,000 men by June 1944.

This is to be in addition to routine releases on medical, age and
disciplinary grounds, and to other releases for special purposes,
for example, seasonal releases. During the next fifteen months,
this reduction and the estimated wastage, after allowing for the
intake referred to in (v), will result in a reduction of the
numbers in the Army by 96,365.

(ii) The Munitions and Aircraft Production 'bloc' are to release
20,000 men by June 1944.

(iii) In the releases under (i) and (ii), priority is to be given
to the immediate provision of 15,000 men for the rural industry to
assist in the achievement of production targets laid down to meet
the commitments for the United Kingdom, the Forces in the Pacific,
and civilian needs. As compared with 1939, there are 150,000 less
men on farms. This represents 30 per cent reduction in numbers,
but as the replacement of active men by aged men, boys and women
has been extensive, the decrease in the effective labour force is
nearer 50 per cent.

(iv) Subject to reductions which may be indicated to be possible
by the review of the works programme, the manpower under the
Allied Works Council is to be limited to the strength existing as
at 31st August 1943.

(v) The intake into the services is to be limited to 3,000 men and
2,000 women per month, subject to further review in December 1943.

The number of men is slightly in excess of the normal net natural
increase of the working population and is the only source now
available. The Government's advisers consider that the maintenance
of the intake of women will require the introduction of compulsory
recruitment. The allotment between the services is 1,500 men and
women for the Army and 3,500 for the Air Force.

PART 3-SERVICE COMMITMENTS OVERSEAS-GENERAL

9. The reduction in the strength of the Army and limited intake
available for the maintenance of the services necessitates
consideration of the extent to which Australia can maintain her
service commitments overseas, which were entered into before the
occurrence of the war in the Pacific.

10. The Government considers it to be a matter of vital importance
to the future of Australia and her status at the peace table in
regard to the settlement in the Pacific, that her military effort
should be concentrated as far as possible in the Pacific and that
it should be on a scale to guarantee her an effective voice in the
peace settlement.

11. The Government is also of the view that, if necessary, the
extent of this effort should be maintained at the expense of
commitments in other theatres.

12. The strengths of the Australian and United States Forces in
the South-West Pacific Area are as follows:-

Land Forces
Australian ...492,000
United States ...198,000
Air Forces
Australian ...136,000
United States ...55,000
The number of Air Force squadrons is:-

Australian:

Operational ..37
Transport ..6
Reserve ..5 48

United States:

Operational ..45
Transport ..14 59

13. The Government is becoming increasingly concerned lest the
American demand for foodstuffs, supplies, services, works and
Australian service and civilian personnel will prejudice the front
line military effort of the Commonwealth. An illustration is the
number of operational squadrons maintained by the United States
Forces relative to their total personnel. This is largely because
of the repair and maintenance work undertaken by the R.A.A.F. and
Australian civil establishments.

14. The interests at stake in this paramount question are not
those of Australia alone. They also include those of the British
Empire in the Pacific. The Commonwealth Government considers it to
be very essential that the Governments of the United Kingdom,
Canada, and New Zealand in particular should understand the vital
importance of the extent of the military effort that should be
maintained in the Pacific by Australia alone or in association
with other parts of the Empire. If the defeat of Japan is to await
the end of the war in Europe, the struggle in the Pacific will be
more prolonged, and it is imperative that a certain minimum effort
should be maintained by or on behalf of the British Empire in the
Pacific.

15. I am outlining below the critical questions which arise in
regard to the maintenance of Australian service commitments
overseas. The A.I.F. having returned to Australia, the remaining
overseas commitments relate to the Navy and the Air Force.

PART 4-NAVAL OVERSEAS COMMITMENTS

16. In accordance with a decision taken in May 1940 [3], which was
before the outbreak of war with Japan, more than 3,000 R.A.N.

personnel are serving overseas manning destroyers, minesweepers
and employed on anti-submarine work.

17. In view of the reductions made in the Army and the
restrictions imposed on the R.A.A.F., the Government has been
unable to make any allocation to the Navy from the monthly intake
of 5,000 men and women, though the Naval authorities require a
monthly quota of 500 for the maintenance of the present strength
of the R.A.N. and personnel overseas.

18. The consequence of this would be that the Navy would be
limited to a strength which would be governed by its capacity to
replace its wastage by the gradual return of the 3,000 personnel
serving overseas and from its existing numbers in Australia.

19. The Government would be glad to have your observations on the
question of returning Australian naval personnel serving overseas,
in the light of the general picture of the Australian manpower
situation as outlined in this cablegram.

20. In submitting this proposal, it has not been overlooked that
the destroyers and minesweepers manned by R.A.N. personnel are
part of the Eastern Fleet which will be used in future operations
from the Indian Ocean against the Japanese. The Government also
fully appreciates the importance of the future role of the Eastern
Fleet and the degree of protection which the Eastern Fleet affords
to the west and northwest coasts of Australia.

PART 5-AIR FORCE OVERSEAS COMMITMENTS

21. The Government has also reviewed the extent to which Australia
is able to continue to participate in the Empire Air Training
Scheme.

22. The Empire Air Training Scheme was originally agreed to in
1939, shortly after the outbreak of war with Germany.

23. The strategical situation changed with the extension of the
war to the Pacific when the Government decided that the
Commonwealth's continued participation in the scheme would be
subject to the capacity to provide the manpower required. [4]

24. You will recall the assurance given to Mr. Menzies, during his
visit to the United Kingdom in 1941, that, should war occur in the
Far East, there would be a review of air resources, with a view to
their redisposition to meet the situation on all fronts. [5]

25. The Government considers that the manpower position in
Australia requires that the Commonwealth's part in the Empire Air
Scheme shall be directly related to the contemplated strength of
the R.A.A.F. in the South-West Pacific Area.

26. There are 20,000 R.A.A.F. personnel serving overseas. Under
Article XV of the Empire Air Training Scheme Agreement, eighteen
squadrons, manned by Australian personnel, are to be formed.

Sixteen exist at present, fourteen being abroad and two in
Australia under the arrangement made by Dr. Evatt with yourself.

[6] Two more remain to be formed in the United Kingdom. Australia
also provides a limited number of ground staff for squadrons
overseas, and two R.A.A.F. regular squadrons (Fighter and Flying
Boat) are also serving abroad.

27. As the total monthly intake for the three Australian Services
is not to exceed 5,000 (of which 3,500 has been allotted to the
R.A.A.F.), the Government feels that Australia could only keep up
her commitment under the Empire Air Training Scheme, and at the
same time expand and maintain the R.A.A.F. in the South-West
Pacific Area at the strength appropriate to Australia's equitable
share in operations in this theatre, by a much greater reduction
in Army strength than that now contemplated. It is averse to any
further Army reduction for various important reasons. The high
incidence of malaria is one of them.

28. In these circumstances, the Government urges that the
precedent initiated by yourself and Dr. Evatt for transferring
R.A.A.F. squadrons from overseas be carried further by the
transfer of additional squadrons. Such squadrons would form part
of the strength of the R.A.A.F. in the South-West Pacific Area,
which would be stabilised at the following figure:-

(i) the present strength in Australia, namely 37 operational
squadrons, 6 transport squadrons, 5 reserve squadrons-total 48,
plus
(ii) the number of squadrons that can be transferred from
overseas, plus
(iii) the strength that can be maintained from the monthly intake
of 3,500 personnel, after providing for an outflow for the Empire
Air Training Scheme as indicated in paragraph 29.

29. In order to avoid disrupting the Empire Air Training Scheme,
the Government is agreeable to continue the outflow of personnel,
but this will be on a diminishing basis as the number of R.A.A.F.

overseas is reduced. The precise number that Australia would be
able to send under the Empire Air Training Scheme under such an
arrangement is now being determined, and will be communicated as
soon as possible.

PART 6 -SUPPLIES AND SERVICES FOR THE UNITED STATES FORCES

30. In view of the manpower position, I am informing the
Commander-in-Chief, South-West Pacific Area, of the definite
limits to which commitments can be accepted for United States
requirements of supplies and services, and of the alternative
choices which such limits impose. [7] These needs of the United
States Forces are estimated to involve at present the employment
of some 75,000 Australian personnel, and there is evidence that
the figure may rise to 100,000 by June 1944.

31. Among the alternative choices which it will be necessary for
General MacArthur to consider is the provision of American
personnel in lieu of Australians, both service and civil, for
service maintenance requirements of the United States Forces and
for major American works projects. Similarly, it will be necessary
for him to consider whether food, goods and services required for
United States troops at present in the South-West Pacific Area,
beyond the limits of our present capacity and the requirements of
additional United States Forces which may be sent to Australia,
should not be provided by the United States. The demands for
foodstuffs alone for 1944 from the United States Forces in the
South-West Pacific Area at present total 50,500,000. In addition,
we have demands amounting to 14,000,000 for deficiencies in
requirements of the United States Forces in the South Pacific Area
which cannot be supplied by the New Zealand Government. The cost
of Reciprocal Lend-Lease for the financial year ending June 1944
is expected to reach close on 100,000,000 or something like one-
sixth of our total war expenditure.

PART 7-CONCLUSION

32. The outline given in this cablegram will enable you to
appreciate the essential remoulding of certain aspects of our war
effort. The changes do not, of course, involve any reduction in
its dimensions, but a re-casting of its nature, scope and balance.

33. The difficulties with which we have been confronted have
primarily arisen from the adoption of commitments, both in
Australia and overseas, which have now been proved to be beyond
our limited manpower resources. It is now essential from the
aspect of our own policy, for us to determine the precise limits
and nature of both the military and civil contribution of which we
are capable, in order to enable it to be related to the wider
plans of the Empire and the United Nations into which our effort
is fitted. The failure to do so would only be misleading the
United States and yourself in regard to the dimensions of our
capacity.

34. I shall be glad to receive your observations, particularly in
respect of the conclusions that I have indicated on our service
commitments overseas. I do not propose to communicate our views in
Part 3 to the other Dominions until I hear from you.

CURTIN