ONE of Australia's most respected diplomats has been parachuted into the Defence Department to bridge a deepening rift between Defence Minister Stephen Smith and the military.
In the dramatic shake-up in the $24 billion department, former special forces commander Duncan Lewis has been replaced as secretary of Defence after barely a year in the job.
The department has been in near revolt in recent months over budget cuts and Mr Smith's criticism of a culture of abuse in the military that has led to a series of sex scandals.
Foreign Affairs chief Dennis Richardson, who had been planning to retire at the end of his term, has now agreed to take on the notoriously challenging Defence portfolio.
Mr Lewis' sudden resignation caught many close observers by surprise and follows persistent reports of a break-down of trust with Mr Smith.
Mr Lewis warned last month of a gap between the government's strategic ambition and what it was willing to spend.
Labor has delayed several major projects, notably a decision to build a fleet of 12 attack submarines and finalise plans for air warfare destroyers, helping to bring the budget back into surplus. But the move has sparked fierce debate in defence circles over whether Australia might be left exposed.
The debate has come to a head after the government brought forward the date to publish a new Defence white paper, with insiders now dismissing it as a ''white pamphlet'' that will be light on detail.
Mr Lewis will be shoe-horned into the role as Australian ambassador to NATO, taking over from Brendan Nelson, defence minister in the Howard government.
In a memo to Defence staff yesterday, Mr Lewis said ''several weeks ago'' Prime Minister Julia Gillard had asked him to consider accepting the post.
''I would like to make it very clear that, notwithstanding media reporting, I have not been forced out of my current position and I am not departing Defence for any reason other than to take up this ambassadorial post at the request of the Prime Minister,'' Mr Lewis wrote.
But the move has sidelined senior diplomat Bruce Gosper who had been expected to take up the job.
Mr Richardson has a reputation as a tough operator who reformed the deeply troubled Australian Security Intelligence Organisation in the years before the terrorist attacks of 2001.
He will achieve a rare double: the first person to hold the top jobs in Defence and Foreign Affairs since the formidable Sir Arthur Tange in the 1970s.
Another former spy chief, Peter Varghese, Australia's high commissioner to India, will take over as Foreign Affairs head.
Mr Varghese has also been persuaded not to quit the public service, having earlier made plain a desire to switch to the private sector after a long diplomatic career and a stint in charge of the Office of National Assessments.
Mr Lewis, a former commander of the elite special forces troops, was National Security Adviser under then prime minster Kevin Rudd.