347 Chifley to McFarlane

Cablegram 527, CANBERRA, 12 August 1948, 10.30 p.m.

MOST IMMEDIATE SECRET

1. You will have seen my telegram No. 2722 from Nimmo advising that United Kingdom will be announcing almost immediately contribution of �50m. sterling to participating countries and suggesting that if Australian Government wishes to make joint contribution with United Kingdom immediate decision is desirable.

2. This follows line of your own advice but is no doubt earlier than you expected. I am doubtful whether we should make any rush decisions because - (a) United Kingdom contribution is apparently to be in form of grant. I had not originally contemplated that Australian gesture would be in form of grant. Grant by Australia to European countries is quite impracticable. A grant to United Kingdom would be difficult at present time and would, of course, require approval of Cabinet and Party which do not meet until end of month.

(b) Only quick action could be in respect of credits and even here there does not appear to be time for discussion and agreement with United Kingdom as to amount and terms of wool credits which might be offered by Australia to selected European countries simultaneously with United Kingdom contribution to participating countries generally.

(c) United Kingdom advice through Nimmo does not reveal position of U.K. - U.S. negotiations on rest of sterling area deficit and trend of American thought as reported by Wilson is rather worrying. See exchange of telegrams with Wilson. Question therefore is whether if we made any gesture now we might still be subject to further pressure from America in association with settlement on finance of rest of sterling area deficit.

(d) Delay would enable me to make firmer assessment of size of credits we might be able to offer and of countries to whom offer could be made with most advantage to Australia. I did not discuss this matter in London as you will have realised advice requested from Wilson and yourself in paragraph 15 of my 709[1] was intended to provide the basis for preliminary examination here. I would also mention that in view of feeling that at the best our balance of payments in 1948/49 will do no more than break even Commonwealth Bank would recommend against granting of credits in excess of �5m. in all.

(e) Delay would also enable me to form clearer view of relative advantages and disadvantages of grant to United Kingdom against wool credits to customer countries.

3. Would be glad of your comprehensive advice after consultation with Wilson on developments in Washington.[2]

[1] Document 343.

[2] On 14 August 1948 Chifley informed McFarlane that after reviewing all the circumstances he had decided that the question must be discussed with Cabinet and party. This would be at the end of the month at the earliest.

[AA : A1838, 703/5/5]