448 Commonwealth Government to Dr H. V. Evatt, Minister for External Affairs (in Washington)
Cablegram PM14 CANBERRA, 31 March 1942
Please see exchange of cables with Legation relating to informal talks particularly our cable of 2nd February indicating desire to give reciprocal aid subject to limiting factor of our balance of payments  and reply of 4th February  giving unofficial views of Acheson  in which he expresses desire 'to work out some indirect means whereby Australia can meet cost of American requirements in Australia and U.S. can reimburse us by helping to meet some of our other oversea obligations to roughly an equivalent amount'.
2. Since then we have given considerable information and had been awaiting Minister's  advices after further talks in light of such information, before making formal offer to U.S. Government.
3. On 27th March Prime Minister  and Treasurer  had talk with American Minister  at which latter read memorandum handed by Acheson to Australian Legation on 24th March. A summary of this has since been received from Legation. 
4. This communication only requests decision as to procedures but in view of our previous informal approach Government desires that in now taking up matter formally you should advise American Authorities on following lines:-
(a) Government accepts general principle of reciprocal aid to U.S.
Forces in Australia subject to details still to be arranged. This confirms informal offer made to State Department through Casey early in February.
(b) Government would prefer joint discussions in Washington with American authorities and U.K. authorities on questions raised in U.S. memorandum of 24th March.
(c) As intimated informally Government is anxious to reciprocate in every way and pending final arrangements are now providing practically all local supplies and services including works for U.S. forces. Expenditure may reach 40 to 50 millions a year and on top of our own programme this will materially increase strain on internal resources and tend to weaken balance of payments.
(d) Our external balance of payments for current year, after allowing for overseas war expenditure 65 millions, is estimated to result in deficiency 65 to 70 millions. Some improvement is expected next year but the indications are there will still be an appreciable deficiency. The Government is therefore particularly concerned that this should receive special consideration in the proposed discussions so that our sterling funds will be maintained at a reasonable level.
(e) There is one aspect of our overseas transactions on which some immediate relief might be possible. Deliveries to Australia to end of February under Lend-Lease were less than 5 millions. On other hand cash commitments for imports from U.S. this financial year, largely for goods directly and indirectly required for war purposes, are estimated at about 30 millions. It is suggested that American authorities might in the circumstances desire to divert, where practicable, some of these cash orders to Lend-Lease.
5. It is assumed discussions will commence as early as possible and Government would like you to represent Commonwealth if it does not interfere with your other arrangements.
6. Suggestion in paragraph 4 (e) is prompted by Acheson's desire, as expressed by him unofficially, to assist our position by 'indirect means'. This might be taken up by you without awaiting joint discussions and any difficulties at American end ironed out.
7. The foregoing covers the more pressing points mentioned in telegram 524.  Glad to receive advice as to what is involved by paragraph 3.  This and other points raised together with such additional information you may request will be subject of a further telegram.