Your No. 355. [1]

1. I have noted your decision to institute a permanent scheme of
compulsory national service and your reference to its economic,
industrial and financial implications.

2. In regard to Paper P.M.M.(46)31 [2], relative to United Kingdom
Defence obligations, you will recall that, at the meeting on 24th
April [3]', I said that the Australian Government recognised that
in the future they must make a larger contribution towards the
defence of the British Commonwealth; and they believed that it is
in the Pacific that this contribution could best be made. I added
that the extent of their contribution would depend on the
proportion of their national income which they found it possible
to allot, in money and manpower, to defence purposes.

3. On my return, the documents and proceedings of the Conference
on responsibilities for Commonwealth Defence were referred in the
first place to the Government's technical advisers, but their
report has not yet been received. This aspect is wrapped up with
the strength, organisation and cost of the Defence Forces which
should be provided under our postwar Policy, and on which the
technical advisers have been working for some time. It will be
necessary for the Government to consider all these matters in
conjunction, and some time will elapse before decisions are
reached.

4. However, I would mention the following Defence commitments
which Australia has already undertaken, and which have a British
Commonwealth implication:-

(a) British Commonwealth Occupation Force
(i) We have provided a contingent for the British Commonwealth
Occupation Force, the strength of which, according to our latest
information, was the highest percentage for any part of the
Empire.

(ii) We have supplied the Commander-in-Chief and the bulk of the
Headquarters staff of B.C.O.F., and also the greatest proportion
of Forces and Base Troops.

(iii) We have undertaken obligations for supply for B.C.O.F. from
Australia which involve the maintenance of much larger
administrative strengths than would otherwise be necessary for our
own forces alone. The cost of this runs into several millions.

(iv) We provided, over and above our component of the Force, an
Air Construction Squadron. This was to be a temporary measure, but
it is still a continuing commitment.

(b) Intelligence
We have agreed to establish a Joint Intelligence Bureau and Signal
Intelligence Centre in Australia, the annual maintenance cost of
which has been estimated to rise to 500,000 in the third year,
apart from capital expenditure of 30,000 in the first year.

5. As you are aware, the Government is, at present, considering
the proposals relating to the establishment of a range and
facilities for testing guided projectiles in Australia. The
estimated capital cost in the report of the Evetts' Mission is
6,000,000, which does not include 1500,000 for road and railway
extensions, and 9,000,000 which is the cost of the Salisbury
factory, should it be used as a development establishment. The
annual maintenance cost has been estimated at 3,000,000. The
Government is at present considering your proposals in regard to
the liability for the cost of this project, which has important
implications for the whole of the British Commonwealth.

6. My statement in paragraph 2 above was made during the
discussion on bases in the Pacific, with special reference to the
cost of their maintenance. The cost of taking over Manus and
maintaining it in an effective condition would involve the
expenditure of several hundred thousand pounds, according to what
the Americans might be prepared to hand over, and the annual
maintenance would be substantial.

7. In regard to Paper P.M.M.(46)20 on the machinery for inter-
Commonwealth collaboration in defence matters, you will recall
from cablegram No. 346 of 30th September [4], in reply to your
D.866 [5] relative to Command Paper 6923 (Central Organisation for
Defence), that I stated the Commonwealth Government's viewpoint is
as expressed by me in London, and in my review to Parliament on
19th June. The Conference documents and proceedings on this matter
were referred to the Government's technical advisers with the
following instructions for drawing up a plan to give effect to the
Government's views:-

(a) In the case of the Australian Higher Defence Machinery,
provision should be made for co-opting the High Commissioners of
the United Kingdom and New Zealand (and others as necessary) to
the Council of Defence when matters affecting those parts of the
Empire are under consideration.

(b) Similarly, provision should be made for co-opting the Head of
the Accredited United Kingdom and New Zealand Service Staffs to
the Defence Committee (Australian).

(c) Corresponding provision would also be necessary for Australian
representation on the parallel machinery on the Governmental and
official levels in the United Kingdom (and New Zealand if
necessary).

(d) The system for co-ordination of Empire Defence, in so far as
Australia is concerned, will be based upon the Higher Defence
Machinery outlined in document P.M.M.(46)10:

The Council of Defence
The Department of Defence
The Defence Committee.

When the detailed plan to give effect to the above is received and
considered by the Government, a further communication will be
forwarded to you.