Canberra, 18 February 1966
Secret
I have had a quick look at your draft Cabinet Submission on the ultimate status of Papua and New Guinea.2
My first reaction is to query why, at this stage, we must try and give precise answers to the Select Committee on the ultimate status of Papua and New Guinea. Presumably, there are a number of steps for the Territory to go through before it attains self–government and when that stage is nearer that would, perhaps, be the time to give precise answers. Perhaps we should also move cautiously in a situation where we could be accused of trying to impose certain wishes on the people when particularly in the case of the Trust Territory the people should make the decision.
I gather the impression from your draft submission that most of the arguments lead toward ‘disengagement.’ On the other hand, you obviously favour a form of ‘close association.’ No doubt you would agree that many forms of close association would be possible and I think a weakness in the paper is that Ministers are not being given sufficient information about various alternatives on which to base any decision. For instance, we could not support ‘a seventh state’ relationship or any close association that could lead to requests by the people of the Territory that their standards—wages, services and so on—should be equated to those pertaining· in Australia. No doubt it could be argued there is still ‘close association’ between Britain and Cyprus and between New Zealand and Western Samoa even though both Cyprus and Western Samoa have achieved independence—which in your draft would appear to qualify as ‘disengagement.’
As you will be aware, the Territory loan raisings are no longer subject to specific Loan Council approval but the Treasurer keeps his colleagues informed generally about the Territory programme. This change was made as an acknowledgement of the different and developing status of the Territory and should the Territory be given independence it would be difficult to envisage ‘the terms of its loans being approved here and the Commonwealth accepting the responsibility for repayment. I would also like to have a little more information about what you mean by ‘common currency arrangements.’ For instance, the Gilbert and Ellice Islands and the New Hebrides commonly use Australian currency but we are not obligated to help out if they have any balance of payments deficits. Perhaps you might also like to have another look at the section on private investment. While no doubt investors would welcome some close relationship, my impression is that in recent years most investors have been thinking in terms of eventual independence and have taken this probability into consideration in considering their expected returns. Any suggestion of a scheme for the Commonwealth to compensate if assets are expropriated . is not likely to be favourably received in this quarter nor would be the thought of the Territory being a permanent and automatic burden on the budget.
[NAA: NA 1983/239, 11/2]
1 Sir Richard Randall, Deputy Secretary, Treasury.
2 Final is Document 25.