We are carrying out substantial works at the request of U.S.

military authorities in Australia. The present programme in this
connection is in the region of 6m. and it is to be expected that
funds required will increase not only for works but also for
stores, rations etc. as American forces in Australia increase.

Pending formal discussion with U.S. authorities as to allocation
of joint expenditure and settlement by U.S. we are charging all
direct American and joint Australian expenditure to a special
division.

It would assist our consideration of the financial question if you
could let us know without making any formal approach to the U.S.

Treasury what their ideas of any financial arrangement between
Australia and U.S. are likely to be, particularly whether they
wish all or part of our expenditure to be offset against benefits
which Australia may obtain under Lease-Lend.

We are anxious to reciprocate in every way but must nevertheless
have regard to the limiting factor of our balance of payments,
particularly in view of our heavy sterling commitments for
maintenance of overseas forces. A careful assessment of these
factors is necessary before we can give any final consideration to
adjustment of expenditure on account of the U.S. forces in
Australia and it would be of great assistance if you could
discover informally what offer of reciprocal aid from the
Australian Government would be politically welcomed and regarded
as reasonable by the U.S. Government.

Could you advise also whether the U.S. Government contemplate
sending a Treasury Official to Australia with whom these matters
could be discussed. If not, we urge that one should come and that
he should have suitable authority to finalise questions of
financial liability and settlement.

Please arrange for Macgregor [1] to receive copy of this telegram.