1. We have noted with interest the preliminary appreciation of the position in Java in your D.1982.  It seems to us that a critical stage in the situation is rapidly approaching and that, in view of the vital Australian interest in a satisfactory and enduring settlement guaranteeing political stability, social progress and our own military security in the area concerned, we should now define our attitude more precisely.
2. To achieve the objective of security in the Pacific area it is essential that administrations responsible should adopt policies which will ensure political, social and economic progress for the native inhabitants, all three aspects being equally important.
Such policies should necessarily be reinforced by regional security arrangements with responsible administration under the aegis of the United Nations Organisation.
3. We feel that it is essential for the purpose of the establishment in these areas of progressive and liberal administrations to bring Indonesian and Dutch authorities together with the object of negotiating agreements satisfying the legitimate demands of the various groups inhabiting the N.E.I. We are watching your efforts to achieve this. The agreements would of course necessarily ensure that any restored administrations should accept in good faith the obligation to administer the islands of the N.E.I. in such a way as to guarantee rising living standards and political and social progress.
4. We cannot agree with the view expressed in Mr. Dening's statement to the Indonesian leaders that the question of the return of the Dutch administration and the terms and conditions of that return is essentially a matter between the N.E.I. and the Indonesians. The satisfactory settlement of this problem is a matter affecting countries who like Australia and New Zealand feel their security interests directly involved.
Accordingly we feel compelled to stress the following points(a) Due regard should be had to the view that the nationalist movement in Java is widespread and the view that Soekarno's administration is not simply a Japanese creation;
(b) The desirability for maintaining the ban on the arrival of Dutch forces in the area while negotiations are proceeding and for continuing the suspension of Dutch authority until settlement is reached;
(c) The obtaining of statements from Dutch leaders specifying political, social and economic reforms to be introduced in the N.E.I., with particular reference to a measure of nationalist autonomy;
(d) The utmost importance of establishing international responsibility for finding a solution of the problem. Political decisions of the greatest importance to the nations of the Pacific area should not have to be made by any one Power.
5. In the event of a failure to arrange a satisfactory settlement between the Dutch and Indonesians, a suitable Inter-Allied Commission should authorize an inquiry by representatives of powers directly concerned and in the light of the facts emerging from these inquiries a further effort should be made to reach a settlement.
We should appreciate your comment on these matters at the earliest possible moment. We feel that it is urgently necessary to consult with other Powers concerned so that any settlement will have the support of all the powers directly interested in the Pacific area.