Repeated to New Zealand, 11. [1]

His Majesty's Government in the Commonwealth of Australia have
carefully considered your cablegram M. 58 [2] relative to the
Burma Road Agreement and the difficult position with which the
British Empire will be confronted at the expiration of the three
months' period.

There appear to us to be three alternatives:-

(i) To temporize in negotiations with Japan in the hope of
something turning up in the constantly changing situation, the
ultimate major considerations in which are the results of the
offensive against the United Kingdom and the Presidential election
in the U. S. A.

(ii) To do nothing and chance the position in which we will find
ourselves at the expiration of the agreement, when we will be
called upon to make a decision to reopen the road, keep it closed,
or seek some middle course.

(iii) To formulate our views on the terms of a general settlement
in regard to China and the Pacific and at some stage put them to
Japan.

A decision on the course to be followed hinges on an estimation of
the danger of Japan's intervention and we feel that the United
Kingdom Government is in a position to judge this best.

Nevertheless, as we view the position here from the information
before us it is evident that, should Germany attempt her invasion
of the British Isles and be defeated, or be deterred from action
this Autumn by failure to gain air superiority, the Empire will be
in a much stronger position to pursue a firmer policy with Japan.

The U.S.A. Government after the Presidential election may also
probably feel better able to collaborate along these lines.

Finally, when the various steps have been taken to strengthen our
defences in the Far East, as outlined in the appreciation in your
cablegram Z.214 [3], we should be in a stronger military position
in this area and thus offer a greater deterrent to Japanese
aggression.

The conclusion of these observations is therefore one of
temporizing negotiations in the belief that time is on our side,
and that the outcome of events in the near future promises to
strengthen our position.

MENZIES