Scott Morrison is considering ordering a royal commission into veteran suicides, but the RSL has savaged the "costly and unwarranted" idea.
The prime minister floated the inquiry after meeting the mothers of six army veterans who took their own lives.
"I haven't ruled it out, it's something that I am actively considering," he told Sky News.
Tasmanian senator Jacqui Lambie, whose swing vote is crucial on controversial legislation, wants to put a broom through the departments responsible for soldiers and veterans.
The crossbencher has not expressly endorsed a royal commission, but has publicly stated she believes the country is heading for one.
However, the RSL has warned a royal commission would cost "an enormous amount of money" that could be better spent in other areas to assist veterans.
National president Greg Melick claimed it would also create a serious distraction for those working to support ex-servicemen and women.
"A royal commission would be unproductive and would undoubtedly impact adversely on programs supporting the veteran community," he said on Friday.
"As well, claims that the veterans' system in Australia is broken and over-burdened by bureaucracy are not backed up by the facts."
One military mother, Julie-Ann Finney, has collected more than 250,000 signatures calling for a royal commission into military suicides.
She and the five other mothers have blamed the ADF for abandoning their sons, and the Department of Veterans Affairs for not offering enough support.
Mr Melick said it was "simplistic in the extreme" to blame the department for veterans taking their own lives.
"This is particularly so when any fair analysis demonstrates that the department is supporting veterans and dealing with their claims more effectively and faster than most other countries," he said.
"A costly and unwarranted royal commission will only disrupt these efforts, as well as the good work being undertaken by veterans' support groups and the department to assist veterans."
However, Senator Lambie said there was a "shocking" culture in the veterans' affairs and defence departments.
"They're still in denial; what they're doing is, instead of worrying about fixing the problem, they're worried about covering their arses," she told Tasmania Talks on LAFM.
"How do you change that? Can that be changed by a royal commission? That's anyone's guess."
Senator Lambie said fewer than one-in-five recommendations arising from previous inquiries had been implemented.
"We had two inquiries about 12 years ago; one into veterans' health and one into veterans' suicide," she said.
"There's only about 17 per cent of those recommendations that have been put through, and that's not all in full, that includes the partial."
Lifeline 13 11 14
beyondblue 1300 22 4636
Australian Associated Press