Ian Watt's appointment as Prime Minister and Cabinet head means for the first time the nation's top public servant will know where the bodies are buried in Defence, analysts have said.
Duncan Lewis's appointment to replace Dr Watt as Defence secretary has been broadly welcomed, with former colleagues and insiders rejecting suggestions it was wrong to appoint a former army officer to the post.
Mike Pezzullo, the chief operating officer of the Australian Customs and Border Protection Service, is being talked about as a possible replacement for Mr Lewis as national security adviser.
Defence is headed by a diarchy consisting of the secretary who is a public servant, and the Chief of Defence who is the highest ranking member of the Australian Defence Force.
Mr Lewis's appointment, which takes effect on September 5, marks the first time an ex-ADF member has held the secretary's post.
A former special forces majorgeneral, Mr Lewis has known his diarchy partner, General David Hurley, since the two entered Duntroon together in 1972.
They were graduates in the class of 1975.
The Canberra Times has been told Dr Watt may not have had much notice of the emerging opportunity in Prime Minister and Cabinet.
The director of the National Security Institute at the University of Canberra, Professor Peter Leahy, said, ''It is a feather in Dr Watt's cap to be elevated like that.
''Prime Minister and Cabinet is the most senior secretary's position in the country.'' Professor Leahy is a former chief of army.
The executive director of the Australia Defence Association, Neil James, said Mr Watt's new job was not one you knocked back when it was offered.
''We are sorry to see him go,'' he said.
A senior analyst with the Australian Strategic Policy Institute, Mark Thompson, said he believed Dr Watt's departure had more to do with the needs of Prime Minister and Cabinet than the situation in Defence.
''We [will now] have a secretary of Prime Minister and Cabinet who knows where the bodies are buried in Defence,'' he said.
Mr James said Mr Lewis was the fourth person in a row outside defence to be appointed secretary.
''He will continue the work of his predecessor in eradicating the poisonous ADF and public service relationship that dates back to the 1970s and early 2000s,'' he said.
''Defence seems incapable of producing a viable internal candidate [for the secretary position]. This is not least because of the irony that the more deputy secretaries they create - they are up to 13 at the moment - the less likely they are to produce one with a broad spectrum of experience.'' Mr Pezzullo is the exception to that rule. A former Defence assistant secretary who rose to become the head of infrastructure, he was the principal author of the 2009 Defence white paper.
He left Defence for his current role in mid-2009.
Professor Leahy rejected suggestions Mr Lewis's appointment effectively brought Defence solidly back under military control.
''Yes, he has been a soldier but he has also been a senior public servant . . . The good news is we have a secretary who can talk the language of both the soldiers and the bureaucrats,'' he said.