Australia, in its isolation as a western country in the Asian region was parochial and rather naïve and narrow minded in its international outlook and many people had become xenophobic. Over previous decades a collection of policies had been implemented effectively barring people of non-European descent from immigrating to Australia.
Under the terms of this White Australia policy – the non-Europeans from NEI were initially not accepted as refugees and were stranded in NEI and many ended up in concentration camps. When large number of military and merchant ships arrived in Australia as they could not go the NEI or the Netherlands, the government could not send the coloured people back and it was agreed that as long as the Dutch Government agreed to accept them as long as they would return home at the end of the war. This largely happened without too much complication. However, as we will see later Australia did have – for a long time – problems how to classify the (half-blood) Indo people of NEI. Several of the NEI military officers, including the Governor General Hubertus van Mook, were Indos. While at a senior government level this doesn’t seem to have created problems. At middle management military levels this often led to Australians having a negative view on these people.
This was further exacerbated by the fact that the Dutch were adamant to keep a clear Dutch presence in their war against the Japanese especially at their bombing raids on the Japanese in NEI. The Australians wanted to have more of a RAAF presence. Also the Dutch didn’t have a good supply of goods and materials and where often seen as inferior to the Australian troops.
With the collapse of the both the Netherlands and NEI, the Australian wondered if the Dutch would be capable to defending NEI after the war and this was another reason why they pushed for their involved in the NEI after the war. They argued that Timor and Dutch New Guinea were basically left defenseless and they wanted to see a much better security for Australia (and New Zealand) from the north and for that purpose they wanted to be involved in the post was arrangements,
Australia also saw an opportunity to strengthen their ties with NEI (without the Netherlands being an intermediary) and argued that as allies fighting for the liberation of NEI, they should have say in the re-colonisation of NEI. Both America and Australia were anti-colonial and in favour of self-determination of the people of NEI. In 1943 the Australian Attorney-General and Minister for External Affairs Hubert Evatt even started to talk about Indonesia and the Indonesians and this again infuriated the Dutch.
There was also clearly a difference of opinion between Evatt and the Australian Prime Minister John Curtin. The latter was far more appeasing to the Dutch and throughout the war the led to tensions both within Australia and with the Dutch,
Despite these posturings Curtin follows this up with a statement that Australia supports the restoration of Dutch sovereignty of its colonies to their north. Nevertheless Evatt continued to make statements about Australia’s policy to become part of the post war restoration of NEI. This made the Dutch suspicious of Australia’s position.
The Dutch were indeed adamant to take full control once the war was over. They were supported by the Brits, of course the largest colonial power of the day. The Dutch Government-in-Exile in London saw themselves strengthened by the Brits. The NEI Commission in Australia stood closer to the position of the American and Australian Commission as many of the members of the Commission were Indos. This in-turn led to tension between the Dutch in London and those in Australia. Furthermore the Brits opposed a more independent foreign policy position from Australia and that also created problems. The Brits warned the Dutch in London against the policies that Australia had in mind for postwar NEI. At the same time they used the opportunity to get betters trade condition with NEI, something that Australia tried to do with the NEI Commission based in Australia.
At the same time Australia started to strengthen their ties with the USA, independent from Britain. General MacArthur supported Australia in their policy to operate more independent from Britain. So not the most ideal situation for trustworthy relationships during this period of crisis.
As early as 1941, the Australian argued that under the auspices of the United Nations there should be a mandate system operated by the Allies, the Dutch were dead against this. They saw a Commonwealth of Dutch Territories including those in the West (Caribbean) , with self-rule within these territories under the leadership of the Netherlands. Australia argued that they should be involved with the islands closest to them, Timor, Ambon and Dutch New Guinea. This led to ongoing political tension.
Nevertheless when on patrol, the collaboration between the Dutch and Australians worked and many friendships were formed during that period. Especially those involved in the guerrilla activities which took place on many of the outer islands and on Dutch New Guinea.
 The Battles for Timor – Western Australian Museum http://museum.wa.gov.au/debt-of-honour/battles-timor