Our 706 to Prime Minister sent Friday covers nearly every
important point mentioned by Cripps. Talk included some window
dressing but little prospect of Sterling area even with Marshall
Aid on scale at present anticipated, achieving dollar surplus
during next 5 years unless there is substantial improvement in
terms of trade or considerable cut in living standards. We must
recognise that problem is a long-term one.

Cripps emphasised that additional dollar economies are wanted
between now and receipt of Marshall Aid in order to maintain
central reserves. Personally believe appeal should have been based
on urgency of tackling long-term problem partly because action
taken immediately will not be effective till after receipt
Marshall Aid.

Crude calculations (sent in today's bag) [1] show reduction in
dollar deficit for Sterling area other than United Kingdom and
South Africa between 1947 and 1948 at about 60 per cent. I put
Australia's cut at less than 50 per cent.

We must remember that if Marshall Aid approved Britain will obtain
increased supplies food and wide range of materials at time when
she is asking Australia and other Dominions to introduce further
economies. Additional food if properly balanced is, however,
required to raise present diet to minimum number of calories
needed for human efficiency and large part of increased supply of
materials win go into exports (some benefit to Australia) and
essential home investment.

Note especially Cripps stated that pending discussion Marshall Aid
United Kingdom not making any dollar import cuts which will
endanger full employment in this country.

My personal opinion is that Australia, in view of her still
relatively high dollar drawings and now that South Africa has
virtually withdrawn from Sterling area may be singled out for
special appeal. There is an undoubted lack of appreciation by
officials here of what particular restrictions mean to Australia.

Am suggesting in my letter we should tighten food rationing in
order increase exports of meat and sugar. Meat especially wanted
here. Any further cut in oil consumption would be welcomed by this
country.

In answer to question by Australia, Cripps closely implied that
receipt of Marshall Aid by United Kingdom will not provide grounds
for any relaxation in dollar restrictions in Dominions. Rather the
reverse. We must then look to United Kingdom for increased
imports. But increased supplies of materials will only be
translated by this country into the processed goods we desire if
there is an improvement in productive efficiency or longer hours
are worked.

Cripps left no doubt about seriousness of European situation.

Europe's ability to pay for imports is increasing very slowly and
willingness to pay may be altered by political changes overnight.