The former head of the CIA says Malcolm Turnbull made a fatal error in his explosive phone conversation with Donald Trump.

Michael Morell, deputy director of the Central Intelligence Agency and acting director in 2011 and 2012-13, said the Prime Minister should not have tried to talk about the refugee arrangement with the US President.

The thorny subject of the "dumb deal" for America to take asylum-seekers from Manus and Nauru reportedly caused Trump to become aggressive, hold the phone away from his ear and put an early end to the conversation.

"I would try to build a personal relationship the best way I knew how and that would be part of my calculation if I were a foreign leader," Morell said during his Lowy Institute talk in Sydney on Tuesday night.

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"I would tend in this administration to push substance down to a level where it's going to get a proper hearing. I'm not sure if I was an ally that I would talk substance.

"I might leave that to my Foreign Minister to talk to the Secretary of State, or leave it to my national security adviser to talk to David Petraeus [ex-CIA boss and candidate to replace Trump's national security adviser Michael Flynn]."

'BETTER TO FIGHT WITH A FRIEND THAN AN ENEMY'

Australia's Prime Minister Malcolm Turnbull. Photo / AP
Australia's Prime Minister Malcolm Turnbull. Photo / AP

Morell, who last year endorsed Hillary Clinton in an opinion piece for the New York Times, confessed he was actually relieved that Trump had the awkward phone call with Turnbull and not someone more volatile.

"I would much rather have had the President have a bad conversation with your Prime Minister than Xi Jinping," he said. "Better to have a fight with a friend than a fight with an enemy, right, I really believe that. The consequences could have been much worse."

The uncomfortable phone call is unlikely to sour relations too much, with Australia keen to continue a productive alliance and senior American figures including John McCain speaking out in support of the friendship.

Morell believes we have a golden opportunity to be a good example to Trump and even affect his decisions. "I think that our allies can be an influence to pull the US in the right direction and I would strongly encourage them to do that," said the former intelligence analyst. "In Australia's case it's now only talking about the inherent value of this relationship to both countries, the threats both of us face here in East Asia and the best way to manage them."

'TELL TRUMP HE'S WONDERFUL'

Former deputy and acting CIA director Michael Morell said Australia could be an important influence on the President. Photo / AP
Former deputy and acting CIA director Michael Morell said Australia could be an important influence on the President. Photo / AP

The ex-CIA boss said the key for America's allies was to find a way to manage the President. "There is a way of playing him," he said. "There is a way to get on his good side, which is to tell him how wonderful he is. Some people have figured that out. Vladimir Putin was the first one."

Morell said an important part of the intelligence agency's job was to have a good relationship with foreign allies and compare notes on how to handle security challenges and deal with issues around countries like Iran.

He emphasised that it was vital for the CIA to be objective and apolitical, insisting that its staff did not deserve such a frosty start to their relationship with Trump.

"I believe intelligence officers are first and foremost professionals who will serve whoever is the commander-in-chief," he said. "I don't believe any intelligence officers I ever worked for would do anything to undermine the national security of the US."

But he conceded he could understand why the President might be suspicious of the CIA, after senior officials openly criticised him and he faced leaks after his first intelligence briefing.

He said that when Trump went to the agency and conducted himself badly, "morale took a hit."

If the relationship doesn't improve, Morell warned the US could see vital intelligence experts walking out of their jobs.

"The morale is going to depend on the extent to which agency officers think the President is listening to what they have to say and not only the President, but the national security adviser, the two most important people.

"If there's a perception the President is listening, and listening with an open mind, even though he might not agree with what they have to say, it'll be OK. But if there is a perception that he's not listening and he's cherry-picking facts to support his view of the world, I think morale will take a real hit and people will start to leave and it will be a significant loss for the nation."