1. Your E.4  has been discussed with MacArthur.  He appreciates your views in the light of the situation as you see it in Washington and London but he does not agree with the general thesis that, having been given the directive, the main initiative rests with him to obtain the forces for its fulfilment. He considers it is the obligation of the United Nations to provide the forces he has indicated to be necessary, to decide by whom they will be provided, and transport them to the Southwest Pacific Area with the utmost expedition.
2. In MacArthur's opinion his directive should have [been] drafted in two sections, one showing the immediate objectives to be achieved, the main one of which is to ensure the security of Australia as a base, and the ultimate objectives to be aimed at, which might be generally expressed as building up forces in this area for an offensive. In the opinion of those responsible for the grand strategy, the attainment of the ultimate objectives might be somewhat delayed if MacArthur's views on an early Pacific offensive are not accepted, as consideration has also to be given to the demands for a second front, the needs of Russia, the Middle East, India and China. However, the immediate objective of the security of Australia as a bastion in the Southwest Pacific Area brooks of no delay whatsoever.
3. MacArthur states that as the further attempt of the Japanese to move southwards has been frustrated in the recent engagement in the Coral Sea , it is of vital importance to build up and maintain adequate strength to repulse any further attacks of this nature. He observes that the essential backbone of the striking power in this action was the aircraft carriers of the task forces which do not belong to his Command, but only entered it for this operation. I hope there is a full realisation in London and Washington of the grave threat with which we were confronted last week. We knew the strength of the enemy concentration, we knew his intentions, and we knew the prospective date of his attack, yet we were unable to marshal the superior strength to deal him a heavy blow and the whole of his convoy of 24 transports fell back on Rabaul unscathed. Fortune will not continue to favour us with these opportunities if we do not grasp them.
4. MacArthur says that the immediate objective is to provide in the Southwest Pacific Area naval, land and air forces to make it secure as a springboard for ultimate offensive action, and he has cabled to the President  through General Marshall  a statement of his conception of the probable courses of action open to the Japanese, the best means of frustrating them, and the additional forces necessary for the defence of Australia. These consist of the following additional forces:-
Navy-Two aircraft carriers.
Army-An Army corps of three Divisions, fully trained and equipped for operations.
Air Force-A first line strength of 1,000 aircraft.
5. I find that MacArthur is in general agreement with the views we have been expressing since the outbreak of the war with Japan, and all of which I have mentioned earlier. However, I would re- summarise them as the basis on which, as you suggest, we as a Government must ceaselessly argue until MacArthur is satisfied that he has at least the minimum for his immediate objectives. His only point of difference from our own Chiefs of Staff's earlier appreciations is the statement that without adequate naval and air power 25 divisions are necessary for the defence of Australia. He says that if the enemy has superior naval and air power no land forces will be adequate and that air power, both sea-borne and land-based, is a vital necessity.
6. The following is a re-statement of the Australian Government's viewpoint:-
(i) Japan by carefully prepared advances and methodical acquisition of air bases to cover the next step has acquired extensive areas and established herself in French Indo-China, Hong Kong, the Philippines, Malaya, the Netherlands East Indies, Burma and New Guinea. She has secured access to vital sources of supply.
Her main naval strength is still intact. Her land-based aircraft in archipelagoes and narrow waters are a formidable deterrent to naval operations in these regions.
(ii) The defeat and capture of the Forces in the areas attacked, with the retreat of those in Burma, will free for further operations the Japanese Forces employed over a wide area. The indifferent or, in some cases, the co-operative attitude of native populations to Japanese occupation has relieved Japan of the obligation of maintaining large garrisons to prevent insurrection or to combat guerilla activities. Japan is, therefore, in a position to re-group her forces and select her next objectives.
(iii) There would appear to be no grounds for assuming that she will relax her offensive. She is a partner of the Axis and it is to her interest to co-operate in the defeat and destruction of the United Nations. The choices appear to be an attack on Russia, on India or in the Southwest Pacific Area.
(iv) As to the probable direction or directions in which Japan will move, the Mandated Islands, with their naval and air bases, afford a substantial measure of defence to her eastern flank until they are captured by amphibious operations. Within the area now controlled by her, Japan is able to follow her earlier practice of concentrating superior force at the point of contact and she is able to launch a powerful attack against the Southwest Pacific Area.
(v) A similar scale of attack on India cannot be made from a comparably secure position insofar as bases are concerned, as the line of communication in the Indian Ocean is much more vulnerable to a flank attack. Also there would be a dispersion of naval strength west and east of Singapore which would handicap the concentration of the Japanese fleet to cope with a fleet action by the United States Fleet in the Pacific Ocean. The circumstances for an offensive against India are not so favourable for a successful outcome as those against the Southwest Pacific Area.
(vi) It would, therefore, appear, from the Japanese point of view, that the soundest course would be to move against the Southwest Pacific Area first and leave India alone until the results of these operations are ascertained.
(vii) In view of this probable course of action that is open to the enemy, it is of vital importance to ensure that the forces in the Southwest Pacific Area are sufficient to ensure its successful defence. As General Wavell said when Commander-in-Chief of the A.B.D.A. Area, the Japanese drive must be stopped by making a stand and fighting him somewhere. Australia, with its manpower and resources, is the last area in the Southwest Pacific where this is possible. If, at the same time, Japanese home territory, overseas bases and lines of communication can be regularly raided, the maximum defensive-offensive will be developed. The defensive position having been secured, an offensive strategy can be adopted as soon as the necessary forces are gathered.
(viii) The advantages of this course of action are several. It would ensure the security of the Southwest Pacific Area. It would be the best means of protecting India. It would provide a second front for assistance to the Russians by relieving pressure on Siberia and releasing forces for use on the European front or by enabling Russia rejoin with the United Nations in the early defeat of Japan, when the entire effort could be concentrated on Germany.
Finally, a large-scale offensive can be staged more easily and quickly in the Southwest Pacific Area than in any other area.
(ix) If Japan should move in force against Australia and obtain a foothold, as threatened to occur last week with the Coral Sea action, it may be too late to send assistance. Possibly in the long run the territory might be recovered but the country may have been ravished and the people largely decimated. History would gravely indict such a happening to a nation which sacrificed 60,000 of its men on overseas battlefields in the last war and, at its peril, has sent its naval, military and air forces to fight overseas in this one. In the defence of Britain, after the fall of France, there still remained the Navy and Air Force to repel the invader and the Air Force did so. Australia is not so favourably placed. It is a vast territory with poor communications, a small naval squadron, a relatively small army, neither adequately equipped nor fully trained, and a small air force. With superior sea power the enemy can bring to bear superior force and can sever or seriously harass the lines of communication for overseas supplies. It is imperatively and vitally urgent to strengthen this base while time and circumstances permit.
(x) The defence of the Southwest Pacific Area is an obligation of the United Nations, who have approved the directive of the Commander-in-Chief and appointed him to the supreme command. It devolves on them to provide the forces required. Australia is developing its maximum potential, but it is not sufficient, as the Commander-in-Chief has already stated. The deficiency must come from elsewhere and come quickly.