In 1929, following the suspension of the compulsory training scheme by the newly elected Scullin Labor government, financial pressures and manpower shortages resulted in a number of battalions being amalgamated. The 20th Battalion was one of those chosen, and it merged with the 54th, although they were later delinked. An alliance with the Lancashire Fusiliers was approved in 1937. In 1939, the 20th Battalion merged with the 19th Battalion to become the 20th/19th Battalion, adopting the territorial designation of the "Parramatta and Blue Mountains Regiment".