One in 20 positions in Defence are not being filled by current recruitment efforts, Richard Marles admitted. The "personnel crisis" has now grown to a 4000-person or 5.4 per cent shortfall from its combined budgeted uniformed and civilian workforce size.

Richard Marles says recruiting and retaining workforce was harder than it has been in decades but goes beyond the labour demands experienced across other sectors and industries.

"It also has to do with ensuring that Defence's recruitment reflects the way young Australians approach their careers and that within this context the Defence offering is competitive," the minister told the Sydney Institute on Monday night.

"What is completely clear is that urgent action is required if we are to respond to our more challenging strategic environment. Because right now we have a defence personnel crisis."

Defence described an imminent personnel crisis in its incoming minister's brief to Mr Marles earlier this year. That crisis has been realised, he confirmed.

The ADF is almost 3000 or 4.6 per cent below its allocated size, with increasing numbers leaving since mid-2020 and a recruitment drop-off. ASPI calculated the force needs to fill 13,000 positions this decade but is growing at only 300 personnel per year.

The Defence public service is more than 1000 workers below its budgeted size almost 17,000 but has approximately 8000 contractors on its books.

"Underpinning the development of a new strategic posture for our nation will be having the people and the funding to make it happen," Mr Marles said. He thanked the "incredible" defence personnel for their commitment and service to securing the nation's interests.

The minister also made his first detailed comments about the direction of upcoming major announcements as part of the AUKUS and Defence Strategic Review early in the new year.

"I believe the cornerstone of future Australian strategic thought will be impactful projection," he said.

"We must invest in targeted capabilities that enable us to hold potential adversaries' forces at risk at a distance and increase the calculated cost of aggression against Australia and its interests. And we must be able to do this through the full spectrum of proportionate response."

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The war in Ukraine demonstrated the need to sustain in warfighting, especially ammunition, and establish more responsive and secure supply chains and logistics, he said.

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