Former prime minister Paul Keating has launched an extraordinary attack on Australias spy chiefs, calling them nutters and urging Bill Shorten to sack them to improve relations with China if he wins the election.

Mr Keating suggested security agency ASIO was running Australias foreign policy under the Coalition and predicted a Labor government would make a huge shift in Australias China strategy by accepting Beijings right to express its growing power.

Mr Keating was speaking at Labors campaign launch, where Mr Shorten described Mr Keating during his speech as a wonderful source of advice to me and my colleagues.

The former prime minister said a Labor government should replace the current leaders of the major intelligence agencies because they were taking too hawkish a stance on Chinas rise

When the security agencies are running foreign policy, the nutters are in charge, he told the ABC.

They’ve lost their strategic bearings, these organisations."

He added that they had gone berko over the threat of Chinese interference and influence in Australia.

When asked how Labor should take the agencies advice, Mr Keating said: You’d clean them out. You’d clean them out.

Australias policy has been that it welcomes Chinas economic and strategic growth, but also that it will express its disagreement when it considers Beijings behaviour to be damaging to peace and stability.

In particular, Canberra has taken issue with Beijings construction and militarisation of islands in the South China Sea and taken steps to curb foreign influence and interference in Australia, which while not officially targetting any country is widely seen as aimed at China.

Mr Keating suggested Australia has not regarded China as a legitimate power and said that what we have to do is recognise the legitimacy of China.

On Canberras relations with Beijing, Mr Keating said there was healing to be done.

I think that a Labor government would make a huge shift, just merely making the point that China’s entitled to be there, rather than being some illegitimate state that has to be strategically watched, he said.

Mr Keating has been a frequent critic of both Australias and the United Statess policies towards China, saying they are seeking to contain Chinas rise.

He praised China as “a great state” and the world’s soon-to-be-largest economy, saying: “If we have a foreign policy that does not take that into account, we are fools.

He attacked the role of John Garnaut, a former_Sydney Morning Herald_and_Age_ China correspondent who became an adviser to former prime minister Malcolm Turnbull and co-wrote an influential, classified report on Chinese influence in Australia.

Mr Keating said the spy agencies had gone berko since that report was written.

When you have the ASIO chief knocking on MPs’ doors, you know something’s wrong, he said.

It is not clear what specific incident he was referring to.

Earlier this year, ASIO head Duncan Lewis rejected suggestions the agency had been targeting the Chinese community after the Department of Home Affairs stripped billionaire political donor Huang Xiangmo of his permanent residency while he was overseas.

Security agencies had expressed concern about the billionaire’s links with the Chinese Communist Party, and had warned political parties about accepting donations from him.

The agency has also repeatedly warned that foreign interference and influence is at unprecedented levels in Australia today.

See Also JOHN MENADUE. Our intelligence agencies are out of control .