(Adds Chinese ministry comment)
By Colin Packham
SYDNEY, Oct 17 (Reuters) - Australia's national intelligence agency said in a report this week that it does not have enough resources to collect intelligence on foreign agents and their efforts to interfere.
Australia, a staunch U.S. ally, has been on heightened alert against the threat of home-grown radicals after several "lone wolf" attacks in recent years.
But the Australian Security Intelligence Organisation (ASIO) said that as it focuses on those threats, intelligence gathering on foreign interference is falling short.
"With the terrorist threat showing no signs of significantly decreasing, ASIO has limited scope to redirect internal resources to address the increasing gap between demand for our counter-espionage and foreign interference advice, and our ability to furnish this assistance," Duncan Lewis, former Director-General of ASIO said in the agency's annual report.
Lewis left ASIO in September, several weeks after the annual report was presented to the government. The report was published on Wednesday.
ASIO last year had annual budget of A$533.4 million ($361.91 million) and employed more than 1,900 people.
Minister for Home Affairs Peter Dutton said that ASIO would get more money and that staffing would rise to more than 2,000 people.
"It is getting unprecedented funding and we will continue to support it," Dutton told reporters in Canberra.
In September, Lewis, who led ASIO for more than five years, warned that foreign interference presented a greater threat than terrorism.
Australia last year introduced tough new laws to curtail foreign agents after noting that China was trying to interfere in its affairs.
Australia now requires lobbyists for foreign countries to register and it makes them criminally liable if they are deemed to be meddling in domestic affairs.
The legislation damaged ties with China, Australia's largest trading partner. The relationship has been particularly strained in recent months after a spate of cyber-attacks blamed on China.
Asked about the ASIO report on Thursday, a spokesman for China's foreign ministry said the accusations of Chinese interference were "a ruthless trick of fabrication brought about by a small domestic faction in order to achieve ulterior political goals".
Reuters reported this month that Australian intelligence had determined China was responsible for a cyber-attack on the national parliament and its three largest political parties before a general election in May, according to five people with knowledge of the matter. denied involvement in any hacking attacks and said the internet was full of theories that were hard to trace.