My cable 940. [1] Before the week-end Bolton advised delaying
approach for two or three weeks as American attitude to drawing
generally was unchanged for a variety of monetary and political
reasons. In particular Congress had been dealing out billions for
E.R.P. and arms aid and was critical of further issues from the
Fund.

2. I explained delay was impossible and today sounded out the
Americans. I first saw Martin [2] of the Treasury and in a short
talk gave him reasons for drawing. [3] I stressed the emergency,
urgency and reasonableness of our case and added some useful
background. I said ours was a special case and assistance was
needed to avoid serious dislocation of industry. Martin indicated
there was no shut out on drawings, but each case had to be very
carefully weighed. He listened carefully to me and mentioned he
would speak to Snyder, but made no promise. I think, however, he
will be sympathetic.

3. We arranged I should talk to Southard as to details. I gave
Southard a similar background and then explained the emergency
character of the request. I stated that the current level of
imports, viz. 180 million dollars, together with the seven months
lag, made it impossible to achieve the target of 120 million
dollars without complete cessation of some imports and serious
disruption. I outlined the nature of the imports for last year to
show they were essential and little of a capital nature. I
referred generally to our economy, record, etc.

4. Southard stated that it would require very serious
consideration and he would have to apply the tests to our case as
previously notified to the Board because of its bearing on other
requests that may be received, including India. He was seriously
concerned with the prospect of repayment which would depend on our
access to the sterling-dollar pool. The Fund could not underwrite
our inconvertible sterling balances nor could it agree to a
drawing unless prospects of repayment were satisfactory and that
was the difficulty in our case.

5. As he featured these points at some length I stated that access
to the sterling area dollar pool was an important factor in our
general position but it should not govern a judgment because there
were other sources available, including export drive for dollar
earnings; prospects of capital inflow; Australian potential in the
next ten years; the diversion if necessary of exports to dollar
area of such items as gold, metals, etc., and the further
restriction of imports so as to provide a greater margin for
repayment; and in an extreme emergency, the gold reserve.

6. I added that the risk of repayment from Australia was very much
less than the risk of repayment from most other countries that had
received drawings. He agreed but said that did not make his task
any easier. I put forward further arguments as to the importance
of not halting Australia's progress; our position in the South
West Pacific and close political and strategic link with the
United States.

7. He asked what drawing was contemplated, I replied that you had
in mind the full drawing 50 million dollars, but would not want it
all at once. I indicated there was an obvious shortage of about
40,000,000 dollars after allowing for commitments and cuts in
licences. I emphasised the urgency of our application and
mentioned that Parliament would be rising about the 21st October.

He said he would study the matter closely in conjunction with
officers who were familiar with Australia. It will also be
considered by N.A.C. [4]

8. I must confess to being rather disappointed with Southard's
concern and his critical questions about our sterling link and
prospects of repayment but am hopeful Martin will be more pliable.

In the meantime, I would appreciate any further factors that could
be used on the points at issue (see my gig).

9. I will keep you informed but do not expect any reaction from
the Americans for two or three days. I made it clear to Southard I
wanted agreement before an application was lodged, so there will
be no hitch.

10. News Digests here are still featuring extracts from London
papers about joint British-Australian drawing and also Australian
drawing or borrowing, some of which appear to have come from
Canberra News correspondents.

11. I take it you do not want me to sound out a loan for capital
purposes from Export/Import Bank or International Bank. If you did
so desire, the former would be quicker and probably cheaper, but
it may not have the same appeal to you as the International Bank.