The Australian government has reacted angrily to a pledge by the opposition to withdraw Australian troops from Iraq by Christmas.
Latham accused the government of having "no exit strategy"
Opposition Labor Party leader Mark Latham said Australians were worried about security and felt it would be safer if the troops came home.
But Prime Minister John Howard said Australia would not "cut and run" and leave its job in Iraq unfinished.
Australia has about 850 troops serving as part of the US-led coalition.
The situation in Iraq has become a serious political issue in Australia, as the country gears up for elections in October or November.
Mr Latham said earlier this week that, if he was elected, he would withdraw all of
Australia's military personnel from Iraq after a scheduled June handover of power from the US-led coalition to Iraqi authorities.
On Thursday he defended his proposal, saying Mr Howard's government had "no exit strategy" for the troops in Iraq, Australian media reported.
"We are going to be much safer as a nation if we have our troops here instead of on the other side of the world," he was quoted by Reuters news agency as saying.
However Mr Howard, a staunch supporter of the US government over the recent conflict in Iraq, condemned Mr Latham's proposal as "un-Australian" and said it sent the "wrong signals" to both its allies and the Iraqi people.
"At the moment, people should be holding firm and staying strong," he told Australian radio.
Recent opinion polls have put Mr Latham's centre-left Labor Party ahead of Mr Howard's conservative coalition.
'Sending a message'
The US ambassador to Australia, Tom Schieffer, also warned of dangerous consequences if the troops were pulled out prematurely.
He said that, by withdrawing forces, a message would be sent to terrorists that the bombings in the Spanish capital, Madrid, earlier this month - in which 190 people were confirmed killed - had succeeded.
"We don't want [terrorists] to think that the bombing in Madrid has paid some sort of political dividend," he said.
Spain's elections earlier this month saw a surprise victory for the socialists, amid widespread public anger at the government's handling of the bomb attacks and its participation in the Iraq invasion.