Canberra, 4 October 1950
CONFIDENTIAL
South-East Asian Aid Programme
1. I refer to Mr. Spender’s telegrams to Mr. Menzies regarding the Australian contribution to this programme.1
2. Before you left Canberra last Friday I spoke to you on the telephone and obtained your decisions regarding the Treasury attitude to a contribution by Australia.
3. On Saturday morning the Prime Minister examined Mr. Spender’s telegrams.2 Mr. Brown, of Prime Minister’s Department, Mr. Watt, of External Affairs, and I were present. I attach copy of the Treasury notes3 which were submitted to the Prime Minister at the meeting.
4. Following the meeting, the Prime Minister despatched telegram No. 4805 to Mr. Spender.4 Copy is attached. The gist of the Prime Minister’s telegram is as follows:—
(a) We could not possibly contemplate a contribution over the next six years beyond a total of £20-25 m. sterling and even these figures should not be stated publicly.
(b) Dangerous for Australia to promise, say £10 m. stg. in the first year because of the implication that rate would be continued annually.
(c) Australian contribution of £20-25 m. stg. would be in the form of monetary grants or gifts of commodities such as flour, or of loans through the International Bank.
The Prime Minister came to these decisions after balancing the financial and economic factors and the foreign policy factors.
5. Mr. Spender’s telegram No. 583 from New York5 indicates that he is endeavouring to reach the Prime Minister by telephone in order to obtain authority for the following:—
(a) Initial contribution of £10 m. stg. on the condition that it is made clear that this annual rate will not necessarily be maintained.
(b) An overall contribution of ‘at least £25 m. stg. over six years’ with annual amounts being determined in the light of the position of the South-East Asian programmes and Australia’s balance of payments position.
(c) Australian contribution to be predominantly by way of loan through the International Bank or otherwise.
Treasury comment
6. Mr. Spender’s revised recommendations follow the lines of the P.M.’s telegram but as a result of certain variations are likely, in my opinion, to lead to a substantially larger commitment on Commonwealth finances; e.g.
(a) I still consider that an initial contribution of £10 m. stg., even with the qualification that it is not a precedent, will in practice make it extremely difficult to contribute smaller amounts in subsequent years.
(b) Mr. Spender speaks of an overall contribution of ‘at least £25 m. stg.’ compared with the Prime Minister’s phrase of ‘beyond a total of £20-25 m. stg’.
7. In support of his recommendations Mr. Spender emphasises that a small initial contribution by Australia would make a poor impression, and also that in the main our contribution would take the form of loans. Neither of these points alters my view that it is necessary to limit the additional burden to be placed on Commonwealth finances, and in my view the original instructions to Mr. Spender should stand.
8. I would also mention that during the discussion with the Prime Minister on Saturday there was a suggestion that any contribution by Australia through the International Bank should be regarded as additional to the total of £20-25 m. stg. over six years approved by the Prime Minister. I opposed this suggestion because loans by Australia through the International Bank throw a burden on Commonwealth finances in the same manner as loans made direct to the recipients. The only difference is that loans through the International Bank come under supervision by the International Bank instead of by Australia. In the circumstances I suggest that Treasury should maintain this attitude.
Recommendation
9. If you are in agreement with the foregoing comments I suggest that you might speak to the Prime Minister, or alternatively let him have a copy of these notes with notation of your views.
[NAA: A1209, 1957/5406]
1 Document 110.
2 Documents 106, 107 and 108.
3 Not found.
4 Document 109.
5 Document 110.