Air Chief Marshal Angus Houston told the Australian Institute of Management leadership seminar yesterday that the US financial situation would be a litmus test for future Australian defence spending.

''If the crisis continues the way it's going in the United States, it will definitely have an effect on the amount of equipment that is produced in the industries in the United States,'' he said.

''We might see, for example, a reduction in the production line of the Joint Strike Fighter ... at this stage we don't know.''

The Rudd Government had planned to buy 100 F-35 Joint Strike Fighters, or four squadrons, next year.

The Chief of Defence Staff acknowledged the crisis could also hamper other defence projects.

''With the amount of funding that goes into defence, clearly the Government will have to factor in defence spending in its consideration of how they deal with the crisis, should it be ongoing.''

Prime Minister Kevin Rudd's dream of a larger submarine fleet could also be in jeopardy.

The Government had previously committed itself to an annual 3 per cent increase in defence spending.

While Mr Rudd acknowledged there might be budgeting difficulties, Air Chief Marshal Houston agreed with his ''political masters'' about the economy's ability to deal with the crisis.

''I think that Australia is much better placed than a lot of other nations, and hopefully we can come through this without too much damage.

''It all depends on what happens over the next few weeks as to what the situation will be and then, clearly, depending on the circumstances, the Government has to respond.''

The defence chief went on to defend the Government's delayed response to a national security report submitted in June.

The report, conducted by former Defence Department secretary Ric Smith, had been sitting on the Prime Minister's desk for four months.

''The business of national security is very complex ... the Government is taking a while to consider it, and I think that's reasonable,'' Air Chief Marshal Houston said.

''I'm not going to point any fingers, because next time we have a report that takes four months to get out and they usually do I'll be under the gun too.''

The report is believed to have been withheld to give the Government time to prepare an appropriate response.

The defence chief used the leadership convention to praise the Defence Force as egalitarian.

''I would submit that our Defence Force is as good as anybody's,'' he said.