Reference your No. 267. 
1. I appreciate your action in replying so promptly after your assumption of office, to my cablegram No. 189  relative to the basing of the British Pacific Fleet on Australia, and fully realise you would not have had time to make yourself fully conversant with the ramifications of this problem.
2. We are pleased to note that you are fully conscious of the strain imposed on Australia's economy by the continued demands of the Japanese war and the relationship of this strain on our depleted resources to our ability to meet the requirements of the Royal Navy.
3. I note your advice that the procedure has been followed of asking Australia for the needs of the Fleet and then trying to make up from your own limited resources whatever Australia cannot provide. It is a matter for some regret that this advice as to the practice being followed was not furnished earlier, as I feel it would have led to a better mutual understanding of the position.
In regard to the capacity of Australia to provide for the needs of the British Fleet, I would particularly recall the views expressed by Mr. Curtin when in London in May 1944 on the limitations of Australia's capacity to accept additional commitments without reducing her war effort in some other direction. The stringency of the situation was emphasised by the references to the measures then in hand and still continuing, for the release of men from the Forces to relieve pressing needs which are essential to the maintenance of a balanced war effort. Subsequent advices, as to the result of the examination of programmes of requirements, continued to lay emphasis on these limitations.
4. It is felt that the Australian Government has been placed in the somewhat embarrassing position of having to justify its decisions, in the face of strong pressure, in imposing unavoidable limitations on the extent of our assistance. It was this point that led to my cablegram No. 133  when the impression had been gathered from Admiral Fraser's representations that he understood the Commonwealth Government had accepted a commitment to meet the needs of the British Pacific Fleet as might be requested by him in Australia. In the circumstances, it should be ensured that the full implications of the practice being followed are understood by all concerned and particularly by the Royal Navy Authorities in Australia.
5. I am unable to accept the interpretation which you have placed on the last two lines of paragraph 7(A) of my cablegram No. 174.
 Read as a whole, this paragraph does not suggest that there is no sound strategical reason for increasing the striking power of the British Pacific Fleet, but it does state that it is neither logical nor equitable for Australia to reduce her own fighting effort and at the same time accept additional commitments to make this increased striking power possible. In regard to the maintenance of the prestige of the British Commonwealth in the Pacific, the Australian Government, as far back as October, 1943, in cablegram No. 267 , emphasised the impossibility of the Australian war effort sustaining this prestige alone, and stressed the fact that Australia did not have the manpower and material resources to meet all the demands being made upon her. The latter was the fundamental consideration emphasised by Mr. Curtin in London when the basing of British Forces on Australia was under discussion. The importance of marshalling the maximum strength in order to bring about the defeat of Japan at the earliest possible moment has been the aim which the Commonwealth Government has consistently advocated for the prosecution of the war in the Pacific. The dimensions of the Australian War Effort have been the practical demonstration of the Commonwealth's views. In addition, we have accepted commitments totalling over 25,000,000 to assist the United Kingdom Government in implementing its undertaking to deploy its Forces in the Pacific. As stated in cablegram No. 189, we have also delayed action to remedy the serious housing shortage by the diversion of men and materials to works for the Royal Navy.
As indicated later, we have depressed the priorities of the works programmes for the Australian Services to give the highest priority to the Royal Navy programme.
6. The considerations which have forced you to concentrate the Fleet's facilities in Australia are noted. In raising the question, in my telegram No. 174, as to whether some of your requirements could not be met by the use of some of the very considerable aerodrome facilities already provided in forward areas and largely unused, we were influenced by the fact that such a proposal formed part of the plan for the basing of the Royal Navy which was under consideration in the earlier part of this year.
7. Regarding the camp for dockyard ratings to which you refer as being essential for the maintenance of the Fleet, this project has been allotted the highest priority and is now under construction.
8. In so far as your other requirements, including aerodromes, are concerned, it is noted that there are, in Australia, or on the way, 3,000 Royal Marine Engineers who are equipped and trained for constructional work and available for employment on Royal Navy Works projects. The advice of the Vice-Admiral (Q.)  was that 1,500 were available for such work. The doubling of this number will be of material assistance in carrying out the Royal Navy Works Programme, although their employment does not, of course, alleviate the shortage of building materials towards the requirement of which it had been hoped the United Kingdom Government would have made a substantial contribution. The programme of works which can be carried out within the overall limit of 6,562,500 is in the main in hand.
9. With regard to your suggestion that some review of priorities might also help in the actual period up to October, I would mention that high priority and other works have been the subject of constant review and the priorities allotted projects for our own Services have been depressed wherever possible to enable Royal Navy works to proceed under the highest priority classification.