Fairfax Media can reveal Greg Moriarty has emerged as a surprise frontrunner for the top post, having only been appointed to the most senior position inside the Prime Minister's Office in April.

A former ambassador to Iran and Indonesia, Mr Moriarty has mostly worked in the Department of Foreign Affairs and Trade, but also had a stint in Defence and served as the Commonwealth counter-terrorism coordinator.

Mr Moriarty's departure would force Mr Turnbull to find his third chief of staff since becoming Prime Minister. His first chief of staff, Drew Clarke, retired earlier this year.

Immigration and Border Protection chief Mike Pezzullo, Australian Strategic Policy Institute boss Peter Jennings, Health Department head Martin Bowles and Department of Human Services secretary Kathryn Campbell have all been touted for the senior Defence role. A view formed last year that Ms Campbell - a brigadier in the Army Reserve - could become the first female to lead Defence, which at roughly 18,000 personnel is Australia's biggest government department.

But Mr Turnbull is understood to be eyeing Mr Moriarty as the best figure to shake up the department, which is seen as having a culture resistant to change and innovation.

The role of Defence secretary is equal in rank to the Chief of the Defence Force – currently Air Chief Marshal Mark Binskin – under an arrangement known as the diarchy. This arrangement is seen to contribute to the bureaucratic lethargy, while a revolving door of defence ministers over the past decade has not helped.

Mr Pezzullo has long been discussed as a potential Defence secretary but would likely take charge of a new Home Affairs portfolio should that be announced by the Turnbull government later this week.

Intelligence community sources have told Fairfax Media that discussions have also been held about a scenario that would see the well-respected Mr Moriarty take charge of Home Affairs and Mr Pezzullo move to Defence. However, this option is considered less likely.

Whoever wins the top Defence job will have a tough task, with Australia in the midst of 30-year spending spree on new submarines, frigates, joint strike fighters and other equipment worth a combined $100 billion.

As one close observer of the Defence establishment noted: "Defence is completely self-indulgent. Whoever gets it will have their work cut out for them".

The vacancy in Defence was created when former secretary, Dennis Richardson, retired in May after nearly 50 years of public service which included stints leading Defence, the Department of Foreign Affairs and Trade, and ASIO.