Bad news for Labor even as it firms in polls.
Prime Minister Julia Gillard has again been hit by bad news as polls show she and the Government are closer to scrambling out of the way of an Opposition landslide at the next election.
While new Nielsen and Newspoll results hardened Labor's recovery trend and placed Gillard ahead of Opposition leader Tony Abbott as preferred prime minister, reports surfaced that Defence Secretary Duncan Lewis is about to quit.
Gillard later confirmed that Lewis will leave the role in October - after just 13 months in the job - to replace Brendan Nelson as Australia's ambassador to Belgium, Luxembourg, the European Union and Nato.
Lewis, a former SAS and special operations commander and, later, National Security Adviser, was the first former serviceman to head the civilian Defence Department. His departure will hand new ammunition to Abbott, who has been highly critical of deep cuts in military spending and the Government's defence management.
Relations between Defence Minister Stephen Smith and Defence have been tense for months, and Lewis is reported to be deeply concerned at a looming gap between hugely expensive spending plans and the ability to fund them.
Department of Foreign Affairs and Trade secretary Dennis Richardson will replace Lewis in Defence from October 18.
Seasoned diplomat and current High Commissioner to India Peter Varghese will replace Richardson as DFAT head. He will take up the role after he returns from India in December.
While lower than issues such as health, education and economic management in voters' priorities, defence and national security remain a sensitive and useful platform for a flank attack on Gillard.
Any new ammunition will be welcomed by Abbott, whose popularity continues to plummet while the Coalition's commanding lead is being eroded by Labor gains.
Yesterday's Newspoll in the Australian showed 60 per cent of Australians are unhappy with Abbott's performance against Gillard's 52 per cent disapproval rating, with Gillard gaining a 14-point lead as preferred prime minister.
The Nielsen poll in Fairfax newspapers said Gillard's approval rating had climbed to 42 per cent, while Abbott's had plunged to a record low of 36 per cent.
Senior Liberal MPs yesterday said the polls reflected the Government's "vilification" of Abbott over allegations of bullying and intimidation of a political rival in his university days.
But the departure of Lewis is likely to bring renewed focus on military spending cuts.
The Australian Strategic Policy Institute estimates that between 2009 and 2011 a total of A$11.7 billion had been deferred, despite the Government's pledge to maintain real growth of 3 per cent a year in defence spending until 2017-18.
That would have meant an allocation of A$31 billion in the May budget.
Instead the overall defence budget has been cut by A$5.5 billion over the next four years, with funding for the present financial year set at A$24.2 billion.
Despite this, and the high tempo of defence operations, the Government remains committed to a new fleet of Joint Strike Fighters, new submarines and maritime patrol aircraft, sophisticated upgrades to Super Hornet strike jets, new battlefield transport aircraft, and the air defence destroyers and huge amphibious warfare ships already being built.
With a white paper due out this year, the Government has not explained where the money will come from.