Asked whether China was willing or able to play a global leadership role, he said: "The answer is no, it's not willing or able to play a serious global leadership role." He said China's recent flirtation with what it calls "a new kind of great power relations" with the United States in the form of a so-called G2 forum "didn't work out very well". "China wasn't ready to take on the responsibility either economically or politically or security-wise," he said. "While China wasn't ready to attempt to create a new international order, it certainly wasn't interested in endorsing the present one." Mr Thawley's scathing assessment of Chinese prospects for global leadership rejects a popular strand of foreign policy debate reflected in book titles such as When China Rules the World that assume the nation's growing economic might will inevitably transform the international order. And it cuts to the heart of strategic questions about how Australia should think and talk about its dominant trading partner and whether it should accommodate its growing strategic aspirations.

Mr Thawley warned against "hysterical" debates about China's rising power and American decline. Australia's role was to encourage American leadership and "get our economy back in gear" while also maximising our military power, he said. "Given that we think in my view that US leadership is going to be crucial in the period ahead, we ought to maximise our capacity to influence US strategy and to make sure it maintains its alliance commitments." Mr Thawley's views carry considerable weight in Canberra, including with Prime Minister Tony Abbott, who recently drafted him from the private sector into his current role. Mr Thawley was previously prime minister John Howard's key foreign policy adviser and ambassador to the US during the 2003 Iraq War. His comments also reflect a view that the Obama administration's reluctance to project power abroad is an anomaly that will end after next year's US election. He said enduring US leadership would be underpinned by internal economic resilience, absolute military dominance and public support at home and among allies.

His remarks generated robust debate at the forum, with former foreign minister Bob Carr arguing "One of the reasons China-watching is so fascinating these days … is that we don't know the answer to these questions, the big question especially: What will be the international character of China if it continues to grow economically, confirming its status as the world's biggest economy?" he said. Mr Thawley also poured cold water on China's aspirations to create a global reserve currency – ambitions that have been publicly supported by the Reserve Bank of Australia, Treasury and several of Australia's leading banks. "China can't afford the costs and who would want all that Chinese credit risk?," he said. Follow us on Twitter