The Royal Commission into Defence and Veteran Suicide is sitting in Perth for its first block of public hearings since December last year.
A strategic review last month called for an overhaul of Australia's defence capability to prepare for potential future conflicts, underpinned by established plans to increase the number of permanent ADF personnel to 80,000 by 2040.
But royal commission chair Nick Kaldas said evidence heard by the inquiry suggested the force had failed to stamp out abuse and misconduct.
"This (target) will be a significant challenge given that the ADF is already operating below strength and is struggling to recruit, retain and grow its workforce," Mr Kaldas said on Tuesday.
"Twenty two months into this inquiry, it's not difficult to identify factors that might be contributing to what the defence minister has described as a defence personnel crisis.
"Sadly, what's abundantly clear from our enquiries to date is that we as a nation need to better protect and support the mental health and wellbeing of those who have served and who continue to serve in our armed forces."
The commission's interim report last year highlighted an uncaring culture and inadequate support services in defence and veterans affairs.
A dysfunctional compensation claims processing system was identified as a major source of trauma and distress for veterans.
The inquiry has received about 3500 submissions to date and completed 470 private sessions with lived experience witnesses, with hundreds more to be held over the coming year.
"Many brave men and women have come forward and shared with us their deeply personal experiences in military life," Mr Kaldas said.
"They have provided damning evidence that a culture of abuse, bullying, administrative and sexual violence continues to exist within defence, where perpetrators are protected by a code of silence and opaque military justice processes.
"We've also heard stories that cast significant doubt on defence's capacity to protect the mental health, safety and wellbeing of its people, many of whom have been repeatedly exposed to traumatic experiences during their service."
The Albanese government has promised to implement recommendations from the interim report, including a simplification and harmonisation of veteran compensation and closing the backlog of claims.
The royal commission will hear evidence from a range of witnesses in Perth including Western Australia's Defence Industry Minister, ex-Navy officer Paul Papalia.
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