- February 19: 128 Japanese aircraft bomb Darwin resulting in 243 deaths and devastation of the airfield, city area and harbour where eight ships were sunk.
- February: Prime Minister John Curtin defies Churchill and recalls Australian troops home from the Middle East as fears grow that Japan is preparing to invade Australia. National defence becomes the main activity of the Commonwealth government.
- March: American General Douglas MacArthur and American troops arrive in Australia. General Macarthur takes command of all allied land, air and naval forces in the Pacific west of Singapore.
- May 8: Prime Minister Curtin announces in parliament the Battle of the Coral Sea:
"I ask the people of Australia, having regard to the grave consequences implicit in this engagement, to make a sober and realistic estimate of their duty to the nation ... Men are fighting for Australia today; those who are not fighting have no excuse for not working."
- May 31: Three Japanese midget submarines enter Sydney Harbour - 19 lives are lost when a torpedo sinks a ferry.
- Following petrol rationing, the rationing of tea, sugar, and clothing is introduced, with butter and meat also rationed in the following years. Civilians carry identity cards, train as air raid wardens and foremen, support war loans and salvage drives and otherwise work long hours for the war effort.
- July 15: The Volunteer Defence Corps is formed - Australia's "Home Guard".
- The power to levy personal income tax is passed to the Commonwealth Government through enactment of the Income Tax (War-time Arrangements) Act.