155 Chifley to McFarlane

Cablegram 2804 CANBERRA, 7 July 1947, 5.45 a.m.

MOST IMMEDIATE TOP SECRET

Your report of 23rd June and telegrams 2300 and 2316 on Sterling Balances. [1]

1. I agree that Rowe-Dutton proposals are not acceptable even as basis for discussion. Australian Government appreciates United kingdom difficulties and is prepared to be reasonable but cannot agree to being pushed around.

2. As I told Dalton if United Kingdom unable to concede agreement satisfactory to us they must act unilaterally.

3. Any arrangement agreed to by Australia must have sufficient flexibility to preserve Australia's independence in control of its balance of payments and trade policy. We would, of course, be reasonable and take account of U.K. position.

4. Your outline proposals provide a satisfactory basis for negotiation on foregoing principles.

5. Immediately following telegram gives detailed comments from Treasury and Bank.

1 Cablegram 2300, dispatched 3 July, reported the derails of an agreement between the United Kingdom and Egypt on sterling balances. In Cablegram 2316, dispatched 4 July, McFarlane conveyed the proposals set out in Document 154.

[AA : A1068, ER47/52/4]