Your cablegram 138  containing appreciation by Chiefs of Staff has been fully considered by War Cabinet, and, in so far as matters calling for immediate decision are concerned, the following are our conclusions and observations:-
(A) Route and destination of convoy and escorts (i) It is noted that in present circumstances diversion of convoys U.S.2 and U.S.3 is not considered necessary and we agree to convoys adhering to their programmes subject to later observations.
In reaching this decision the Commonwealth Government assume that should war with Italy eventuate after either convoy has entered the Red Sea the protection provided or readily available will be such as to ensure reasonably the security of the convoys against sea and air attacks whilst en route to their destination. It is observed that Chiefs of Staff do not anticipate serious difficulty in meeting surface or submarine attacks, but consider it inadvisable to expose troop convoys to the risk of air attack from East Africa in the early stages of the war.
(ii) In regard to diversion it is noted that situation is being watched from day to day, that the Admiralty would issue orders for diversion if the situation should at any time demand it, and that diversion to the United Kingdom is recommended. In view of the fact that immediate action may be a vital factor in the safety of a convoy, we concur in action along these lines, but desire that any such decision should be communicated forthwith for our information and concurrence, and that we should be kept fully informed on the trend of the situation.
In agreeing to diversion via the Cape Commonwealth Government again assume that escort arrangements both to Capetown and thence onwards will ensure security both in respect of surface craft and submarines.
(B) Equipping and re-concentration of A.I.F.
Commonwealth Government notes with some concern the statement in your cablegram 129 of 30th April  that if the war with Italy were to break out subsequent to the arrival of the contingents in Egypt, there might be considerable difficulty in equipping our troops, as necessary material has to come from United Kingdom sources.
It will be recalled that the High Commissioner, in accordance with cabled directions of 26th January , made representations on the situation in the Near and Middle East, the possibility of employment of Australian troops on active operations, and the anticipated rate of provision of modern weapons and equipment.
We would urge in view of the statement quoted that the utmost expedition be used in fully equipping our troops, the present forecast of which is given as mid-September.
Should diversion of convoys to the United Kingdom become necessary the Commonwealth Government stress the importance of reconstituting the whole Expeditionary Force at the earliest possible date, and note your assurance that this will be done.
(C) Ultimate theatre of employment The Chiefs of Staff indicate that the most likely theatres for the employment of the A.I.F. are the Near East and France. You will no doubt raise this aspect again when the training and equipping of the Force has reached a stage to enable it to take the field.
(D) General While appreciating that the Service Staffs are heavily pressed with a large volume of work, we nevertheless frankly feel that cablegram 129 should have been accompanied by an appreciation of the situation involving such radical changes in the routeing and destination of our Forces. I am sure you will agree that the preceding sections of this cablegram fully warrant this view.
It is essential for highest degree of understanding and fullest co-operation that we should be kept fully informed on the higher strategical direction of the war. Again quite frankly we found the review of the Chiefs of Staff disappointing when compared with the special reports which we had had from the C.I.D. The possibility with which we are confronted in the Mediterranean has, we understand, been the subject of examination in recent years and we feel that there should readily be available to Dominion Governments a comprehensive appreciation along the generally accepted lines of this class of document.
Whilst the daily D.W. advices and other cablegrams are valued, we note an almost entire cessation of other documentation relating to Allied activities and the growth of their efforts and critical reviews or intelligence reports as to parallel enemy action. If there is any hesitancy as to transmission of this information it is suggested that it be forwarded to the Prime Minister as Minister for Defence Co-ordination, where the use to be made of it can be determined and the information adequately safeguarded. If it is possible we would particularly like to be informed regularly of the strength and disposition of Allied Forces and those of the enemy in the various theatres. For example, the press has repeatedly reported great concentrations of land forces in Egypt, Palestine and Syria, facts which would of course be of importance to us. We would also like to be informed of military situation at Narvik as present position cannot be reconciled with apparently exaggerated press reports of some weeks ago that Germans had been ejected from neighbourhood.
You will understand that all these observations are made in a spirit of helpful suggestion so that in the light of the fullest information we may be able to see how we can best help in relation to our own Forces.