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The ''cash-strapped'' Gillard government has put its own political risk ahead of Australia's national security, a highly respected former general says. Major-General Jim Molan, the commander of the 300,000 strong coalition force in Iraq in 2004, says Labor's management of Defence since 2009 has been ''appalling'' and is having a ''terrifying'' effect on the Australian Defence Force. General Molan, now a public speaker and defence commentator, is scathing in his criticism of Defence Minister Stephen Smith, who he says has gone beyond ineffectiveness to actively damaging his portfolio. ''Mr Smith does not seem to like the ADF, does not seem to trust it, apparently does not want to be its chief executive, shows no public interest in its ultimate operational effectiveness, does not know how to measure efficiency or effectiveness [and] is risk averse in a portfolio that is all about risk,'' he said. ''He believes accountability starts one step down from himself, irrationally attacks the ADF's reputation and consistently tells political half-truths to the 'shareholders', the Australian people.'' General Molan said that as a result of the recent mismanagement, the ADF was facing ''terminal decline''. He says claims by the Rudd and Gillard governments they have been able to take billions out of Defence with no impact on national security were ''illogical''; that the US government is alarmed by the depth of Australia's defence spending cuts; and that the deferral of the Air Warfare Destroyer project in September illustrates a lack of operational understanding by the minister's office. General Molan is highly regarded within the Australian defence establishment and overseas. ''Jim's service with the multinational force in Iraq was magnificent in every respect,'' his then commander US General George Casey jnr said. General Molan believes as much as $24 million may have been stripped from Australian defence spending to date and fears there could be more to come. ''In the last budget they [the Gillard Government] removed $5.4 billion from spending over four years, but since the 2009 white paper they had also previously removed an additional $12 billion, most of it from investment in modern equipment.'' He says it is folly to think that because Australian forces perform well in ''wars of choice'' such as Afghanistan, we have demonstrated a capability for the ''high-end war fighting'' required in a ''war of necessity'' (ie, an existential conflict) against an equal or superior force. He takes a hawkish view of global affairs, warning that despite community complacency Australia is facing historically high levels of uncertainty. ''The US is deeply worried,'' General Molan says. ''Professor Hugh White has written that there is a 'clear and significant danger' of catastrophic conflict between China and the US. Michael Wesley [the former executive director of the Lowy Institute] has declared there is a rapidly growing threat of conflict involving China, its neighbours and the US in the South China Sea, and Professor Alan Dupont says that of five historical examples of a minor power overtaking a hegemon, conflict resulted on four occasions.'' General Molan, who said all the evidence suggested the former defence secretary Duncan Lewis left his post in September ''because he saw no reason to stay'', says the millions of dollars that have been spent on a plethora of reviews and inquiries since Mr Smith became minister had done little more than ''increase administrative churn''. ''The answer to overcome the disastrous situation is simple,'' he said. ''Honestly and openly align policy and strategy with the real demands of the strategic environment.''

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