314 Department of External Affairs to Mr R. G. Casey, Minister to the United States

Cablegram 133 CANBERRA, 2 February 1942

SECRET

We are carrying out substantial works at the request of U.S.

military authorities in Australia. The present programme in this connection is in the region of 6m. and it is to be expected that funds required will increase not only for works but also for stores, rations etc. as American forces in Australia increase.

Pending formal discussion with U.S. authorities as to allocation of joint expenditure and settlement by U.S. we are charging all direct American and joint Australian expenditure to a special division.

It would assist our consideration of the financial question if you could let us know without making any formal approach to the U.S.

Treasury what their ideas of any financial arrangement between Australia and U.S. are likely to be, particularly whether they wish all or part of our expenditure to be offset against benefits which Australia may obtain under Lease-Lend.

We are anxious to reciprocate in every way but must nevertheless have regard to the limiting factor of our balance of payments, particularly in view of our heavy sterling commitments for maintenance of overseas forces. A careful assessment of these factors is necessary before we can give any final consideration to adjustment of expenditure on account of the U.S. forces in Australia and it would be of great assistance if you could discover informally what offer of reciprocal aid from the Australian Government would be politically welcomed and regarded as reasonable by the U.S. Government.

Could you advise also whether the U.S. Government contemplate sending a Treasury Official to Australia with whom these matters could be discussed. If not, we urge that one should come and that he should have suitable authority to finalise questions of financial liability and settlement.

Please arrange for Macgregor [1] to receive copy of this telegram.

1 Director-General of Australian War Supplies Procurement in the United States.

[AA:A981, USA 181, i]