A.—7

12

II. —Existing Naval Forces. 5. The Commonwealth has taken over the local naval forces from the States of New South Wales, Victoria, Queensland, and South Australia, which are at present maintained at an annual cost of about £75,000. These forces consist of 242" permanent officers and men, and 1,637 partially paid members of naval brigades. 6. For years past no means have been provided in New South Wales for giving to the local naval force any sea training. They have no ships, and are therefore merely sailors drilled on shore, and would be of little value as a naval force in time of war. In Victoria there is the harbour-defence ship " Cerberus " and four torpedo-boats, but the existing means are inadequate for obtaining effective sea training for the men. In Queensland there are the gunboats " Gayundah " and " Paluma," and in South Australia there is the gunboat "Protector"; and in both of these States a limited amount of sea training is carried out. The Colonial Defence Committee has stated, with regard to these local harbour-defence ships, that it is difficult to obtain from them an effect commensurate with the outlay entailed. 7. These local forces, maintained under existing conditions, appear, therefore, to be of small value for naval defence; and if they are to be organized in the future so as to provide a force of trained seamen available for supplementing the crews and for the manning of sea-going cruisers in time of war, suitable ships must be provided in which to train the officers and men at sea. 111. —Eecommendations for Immediate Future. 8. Whatever maybe done in the future, if we accept, as I think we must, Admiral Beaumont's opinion that "it is beyond the power of the Commonwealth at the outset to create a force adequate for the naval defence of Australia, and that such a force can only be acquired and maintained by arrangement with the Imperial Government," it is absolutely necessary, for a time at any rate, to depend upon the Eoyal navy for our naval defence. The Commonwealth under the existing agreement pays the Admiralty £106,000 a year, and New Zealand pays £20,000 a year ; but, as a more powerful fleet is required, a greater contribution will be necessary under a new arrangement. lam informed that the cost of the annual maintenance of the "Eoyal Arthur" alone is more than our whole contribution of £106,000. 9. I would recommend that until a more permanent basis for the naval defence of the Empire is decided upon, the naval defence of the Commonwealth be carried out on the following basis: — (a.) That the existing agreement with the Imperial Government be readjusted and extended for ten years (unless cancelled sooner by mutual consent). The number and class of ships to be stationed in Australian waters, the annual contribution, and all other matters to be definitely dealt with in such revised agreement. (b.) That the existing naval militia forces be made effective for supplementing the manning of sea-going ships in time of war, and that two ships commanded by officers of the Eoyal navy be allotted by the Admiralty for their naval instruction, and with that object to visit the various ports throughout the year. The militia naval forces to be available for the protection of the Commonwealth on land as well as on sea. (c.) That expert opinion be obtained as to what extent the "Cerberus," "Protector," gunboats, torpedo-boats, and existing armaments can be profitably utilised. (d.) That the permanent naval defence forces now existing in Victoria, New South Wales, and Queensland be reduced in strength, and only a staff sufficient for the instruction of the naval militia on shore be retained. It would seem to be absolutely necessary that in any such new arrangement provision should be made for one or two powerful cruisers to be stationed in Australian waters capable of successfully resisting an attack by similar warships of foreign nations. IV. —Proposal for an Australian Navy. 10. If it were desirable for Australia to have a navy of her own, maintained altogether by the Commonwealth, we could in that case buy our own ships of war, man them in our own way, and be quite independent of the Imperial navy. 11. In order to provide even the small squadron proposed by Admiral Beaumont of two first-class and six second-class cruisers, together with depots and stores, would nrobably cost £3,600,000 on the following basis :— £ Two first-class cruisers ... ... ... ... ... 1,000,000 Six second-class cruisers ... ... ... ... ... 2,500,000 Depots and stores —viz., naval yards, &c. ... ... ... 100,000 Total capital cost ... ... ... ... ... 3,600,000 12. The maintenance of this squadron in Australian waters, if fully manned and equipped in a way that would enable it to engage successfully the first-class cruisers of the enemy, with two of the second-class cruisers in use for training, say, two thousand men of the naval militia, would probably amount to about one million a year, including interest at 5 per cent, per annum on the capital cost. 13. It has been proposed, and the plan is much favoured by some, that during time of peace a squadron thus organized should only be manned with sufficient men to maintain the ships in working efficiency, and should be wholly employed in training the naval militia, and that in time of war it should be fully manned by such naval militia collected from the several ports of the Commonwealth. There would no doubt be a saving in maintenance by this course, but Admiral