A former top US diplomat says Australia's major political parties are engaging in a bidding war on asylum seekers, and has labelled Papua New Guinea as unstable.
Richard Armitage, the former US deputy secretary of state, has previously criticised the Gillard government for cutting defence spending to the lowest point since 1938 in the May budget.
In a sit-down interview with AAP, he said instability in PNG showed why spending only 1.56 per cent of economic output on defence was a bad idea.
"It's not as if PNG is the most stable of countries," he said on the sidelines of a Financial Services Council conference in Brisbane.
"This takes a certain level of defence effort and when you are active there, it eats up a certain amount of your capabilities."
He also called on the UN High Commissioner for Refugees to have a greater role in the processing of asylum seekers in PNG, and noted the politics of the issue in Australia.
"There needs to be less politics. This is a national problem, not a Labor or a coalition problem," Mr Armitage said.
"There seems to be a bidding war going on."
In an earlier off-the-cuff speech, Mr Armitage said Americans regarded Australia as having a free ride following the defence cutbacks, but said this could change after the election.
He later told AAP Australia ideally should spend two per cent of its GDP on defence, in accordance with NATO guidelines.
"It doesn't cause diplomatic tensions with the United States, but it's noticed," he said.
"This paltry sum is not sufficient to your defence needs."
Mr Armitage noted that Prime Minister Kevin Rudd's 2009 defence white paper was "more muscular", but added "we'll see" regarding the present Labor government.
Mr Armitage said a potential North Korean missile strike would draw in American allies.
"There's no way we wouldn't all be in it from the get-go," he said, but added that Australia was not viewed by Americans as a "US policeman".
On US politics, Mr Armitage, a life-long Republican who voted for Democrat Barack Obama in 2012, said his party would be unlikely to win the 2016 US presidential election, and predicted Hillary Clinton would run.
"We joke among ourselves ... They say by 2040 if there's a moderate Republican in the White House they want to be ready."
