We are greatly concerned at deterioration in Indonesian situation during last few days. We have watched negotiations carefully and patience of Republican authorities in the face of provocation.
Your reports confirm that recently it was the Republican authorities that made the compromise. 
2. Since the Republican authorities have accepted Dutch demands, with the exception of the internal police force, Dutch who were intending to be less uncompromising now give us the appearance of returning to their over-confident position and are again acting in provocative ways. Recently, in an attempt to encourage the agreement between the two parties which appeared well on the way, and after the discussion at a low level with representatives of both parties, it was indicated that the Australian Government would be willing to assist the new Interim Government in any way it could, having in mind particularly the supply of parts and other equipment immediately required for the rehabilitation of the general economy.  This offer, made in generous and most friendly terms, was the subject of a formal protest from the Dutch authorities. 
3. United Kingdom and United States representatives at Batavia, acting on instructions, have more than once appealed to the Republican authorities to compromise and to meet the Dutch. Having watched these approaches and the responses, it would seem to us that the effect has been unduly to encourage the Dutch into believing that, in the event of crisis, United Kingdom and United States authorities would continue to seek compromise from the Republican authorities.
4. We consider that it is important and urgent that any such impression left with the Dutch authorities should be corrected.
5. As far as our own relations with Dutch and Republican authorities are concerned, over many matters, including the shipping from Australia of Dutch owned goods, we have always found Republican authorities most anxious to avoid friction and most willing to disregard feelings of self-respect, if by so doing trouble could be avoided. On the other hand, we can tabulate lists of acts on the part of the Dutch authorities well calculated to destroy any Indonesian-Dutch relationships we may have been able to build up and to undermine any arrangements which may have been made to move goods from Australia or to recommence trade generally. For example, if the full facts were known, it would be readily agreed that the Australian waterside workers have over a period tolerated to an amazing degree unnecessary acts of provocation on the part of the Dutch. Ships are loading now, but each day we are having to take action to see that the agreement entered into between the Republican and Dutch authorities is observed.
6. Previously we have represented to you that Australia is vitally concerned in events in Indonesia and that we think it would be an advantage if we were consulted before the good offices of the United Kingdom authorities were employed.  That has not been done, advantage has not been taken of our considerable experience in relation to N.E.I. authorities, and at present the consequences indicated in paragraph 3 above look serious.
7. Because of the importance of British Commonwealth maintaining the closest relations with the Netherlands Government at The Hague, the United Kingdom Government has exercised tolerance. The Australian Government throughout the period has always kept this in mind. However, events in the N.E.I. are of vital concern to us and we consider that, in exercising that tolerance, our interests should equally be kept in mind by the United Kingdom Government.
For our own part, having gone as far as we consider we can in encouraging Indonesian and the Dutch authorities to come to agreement, and having seen the Dutch arriving at a position where Republican authorities were prepared to co-operate, we now expect the Dutch to demonstrate that spirit of United Kingdom - United States mediation. If, at this stage, it would seem that agreement cannot be reached, the Australian Government will have no recourse but to raise the matter perhaps in the Security Council or the Assembly and by that means made known the facts of the situation as they appear to us, and by so doing allow world public opinion to express itself on Dutch-Indonesian relationships.