The Department of Post-War Reconstruction was established on 22 December 1942 (Executive Council No. 167, (P.M.'s Minute No. 46) Commonwealth of Australia Gazette, No. 334 of 24 December 1942). In January 1943, a Director-General was appointed and a nucleus staff was taken over from the Reconstruction Division of the Department of Labour and National Service.

The Department's functions were, in general terms to prepare plans for the transition from a wartime to a peace time economy both for individuals in the Services and in War production and for the economy itself. It was to be essentially a planning and co-ordinating department, working in collaboration with other Commonwealth Departments and with State Governments and local and semi-governmental Authorities in the formulation of plans for post-war reconstruction.