In January 1940, Menzies dispatched potential leadership rival
Richard Casey to Washington as Australia's first "Minister to the United States". In a consequent by-election, the UAP suffered a heavy defeat and Menzies re-entered coalition negotiations with the Country Party.
[17] In March 1940, troubled negotiations were concluded with the Country Party to re-enter Coalition with the UAP. The replacement of Earle Page as leader by
Archie Cameron allowed Menzies to reach accommodation. A new Coalition ministry was formed including a number of Country Party members.
[20]
With the
1940 election looming, Menzies lost his Chief of the General Staff and three loyal ministers in the
Canberra air disaster.
[20] The Labor Party meanwhile experienced a split along pro and anti Communist lines over policy towards the Soviet Union for its
co-operation with Nazi Germany in the invasion of Poland; this resulted in the formation of the
Non-Communist Labor Party.
[21] The
Communist Party of Australia (CPA) opposed and sought to disrupt Australia's war effort. Menzies banned the CPA after the fall of France in 1940, but by 1941 Stalin was forced to join the allied cause when Hitler reneged on the Pact and invaded the USSR. The USSR came to bear the brunt of the carnage of Hitler's war machine and the Communist Party in Australia lost its early war stigma as a result.
[22]
At the general election in September 1940, there was a large swing to Labor and the UAP-Country Party coalition lost its majority, continuing in office only because of the support of two independent MPs,
Arthur Coles and
Alexander Wilson. The UAP–Country Party coalition and the Labor parties won 36 seats each.
[21] Menzies proposed an all party unity government to break the impasse, but the Labor Party under
John Curtin refused to join.
[20] Curtin agreed instead to take a seat on a newly created Advisory War Council in October 1940.
[21] New Country Party leader
Arthur Fadden became Treasurer and Menzies unhappily conceded to allow Earle Page back into his ministry.
In January 1941, Menzies flew to Britain to discuss the weakness of Singapore's defences and sat with
Winston Churchill's
British War Cabinet. En route he inspected Singapore's defences – finding them alarmingly inadequate – and visited Australian troops in the Mid-East. He at times clashed with Churchill in the War Cabinet, and was unable to achieve significant assurances for increased commitment to Singapore's defences, but undertook morale boosting excursions to war affected cities and factories and was well received by the British press and generally raised awareness in Britain of Australia's contribution to its war effort.
[17] He returned to Australia via Canada and the United States – addressing the Canadian parliament and lobbying President Roosevelt for more arms production.
[17] After four months, Menzies returned to Australia to face a lack of enthusiasm for his global travels and a war-time minority government under ever increasing strain.
In Menzies's absence, Curtin had co-operated with Fadden in preparing Australia for the expected
Pacific War. With the threat of Japan imminent and with the Australian army suffering badly in the
Greek and
Crete campaigns, Menzies re-organised his ministry and announced multiple multi-party committees to advise on war and economic policy. Government critics however called for an all-party government.