At the time of Berryman's return to Australia in mid-March 1942 the strategic situation for the Allies had changed radically. With the dissolution of the ADBA command and the fall of Singapore it had been decided that the Pacific would be the responsibility of the United States Joint Chiefs of Staff and that the region around Australia would be divided into two: Pacific Ocean Area, under US Navy command, and the South West Pacific Area (SWPA) under the US Army. The man chosen for the command of the SWPA was the then commander of US forces in the Philippines, General Douglas MacArthur.

On arrival in Australia MacArthur was given operational control over all Australian armed forces within the SWPA, and he was to become the chief military adviser to Curtin's Labor government. He was, however, dispirited to find that no significant American force was awaiting his arrival in Australia for an immediate return to the Philippines. Instead he faced a long and bitter struggle in the SWPA, not only against the Japanese but also with the Allied Supreme Command in his bid to get troops and resources allocated to his theatre of operations.

MacArthur set up his headquarters in Melbourne with two American officers as his naval and air force commanders and Blamey as Commander Allied Land Forces. Meanwhile, in order to isolate Australia from the United States and to protect their base in Rabaul, the Japanese were planning for the occupation of New Guinea.