Your No. 355. 
1. I have noted your decision to institute a permanent scheme of compulsory national service and your reference to its economic, industrial and financial implications.
2. In regard to Paper P.M.M.(46)31 , relative to United Kingdom Defence obligations, you will recall that, at the meeting on 24th April ', I said that the Australian Government recognised that in the future they must make a larger contribution towards the defence of the British Commonwealth; and they believed that it is in the Pacific that this contribution could best be made. I added that the extent of their contribution would depend on the proportion of their national income which they found it possible to allot, in money and manpower, to defence purposes.
3. On my return, the documents and proceedings of the Conference on responsibilities for Commonwealth Defence were referred in the first place to the Government's technical advisers, but their report has not yet been received. This aspect is wrapped up with the strength, organisation and cost of the Defence Forces which should be provided under our postwar Policy, and on which the technical advisers have been working for some time. It will be necessary for the Government to consider all these matters in conjunction, and some time will elapse before decisions are reached.
4. However, I would mention the following Defence commitments which Australia has already undertaken, and which have a British Commonwealth implication:-
(a) British Commonwealth Occupation Force (i) We have provided a contingent for the British Commonwealth Occupation Force, the strength of which, according to our latest information, was the highest percentage for any part of the Empire.
(ii) We have supplied the Commander-in-Chief and the bulk of the Headquarters staff of B.C.O.F., and also the greatest proportion of Forces and Base Troops.
(iii) We have undertaken obligations for supply for B.C.O.F. from Australia which involve the maintenance of much larger administrative strengths than would otherwise be necessary for our own forces alone. The cost of this runs into several millions.
(iv) We provided, over and above our component of the Force, an Air Construction Squadron. This was to be a temporary measure, but it is still a continuing commitment.
(b) Intelligence We have agreed to establish a Joint Intelligence Bureau and Signal Intelligence Centre in Australia, the annual maintenance cost of which has been estimated to rise to 500,000 in the third year, apart from capital expenditure of 30,000 in the first year.
5. As you are aware, the Government is, at present, considering the proposals relating to the establishment of a range and facilities for testing guided projectiles in Australia. The estimated capital cost in the report of the Evetts' Mission is 6,000,000, which does not include 1500,000 for road and railway extensions, and 9,000,000 which is the cost of the Salisbury factory, should it be used as a development establishment. The annual maintenance cost has been estimated at 3,000,000. The Government is at present considering your proposals in regard to the liability for the cost of this project, which has important implications for the whole of the British Commonwealth.
6. My statement in paragraph 2 above was made during the discussion on bases in the Pacific, with special reference to the cost of their maintenance. The cost of taking over Manus and maintaining it in an effective condition would involve the expenditure of several hundred thousand pounds, according to what the Americans might be prepared to hand over, and the annual maintenance would be substantial.
7. In regard to Paper P.M.M.(46)20 on the machinery for inter- Commonwealth collaboration in defence matters, you will recall from cablegram No. 346 of 30th September , in reply to your D.866  relative to Command Paper 6923 (Central Organisation for Defence), that I stated the Commonwealth Government's viewpoint is as expressed by me in London, and in my review to Parliament on 19th June. The Conference documents and proceedings on this matter were referred to the Government's technical advisers with the following instructions for drawing up a plan to give effect to the Government's views:-
(a) In the case of the Australian Higher Defence Machinery, provision should be made for co-opting the High Commissioners of the United Kingdom and New Zealand (and others as necessary) to the Council of Defence when matters affecting those parts of the Empire are under consideration.
(b) Similarly, provision should be made for co-opting the Head of the Accredited United Kingdom and New Zealand Service Staffs to the Defence Committee (Australian).
(c) Corresponding provision would also be necessary for Australian representation on the parallel machinery on the Governmental and official levels in the United Kingdom (and New Zealand if necessary).
(d) The system for co-ordination of Empire Defence, in so far as Australia is concerned, will be based upon the Higher Defence Machinery outlined in document P.M.M.(46)10:
The Council of Defence The Department of Defence The Defence Committee.
When the detailed plan to give effect to the above is received and considered by the Government, a further communication will be forwarded to you.