"Defence takes any compromise of its information seriously, and the circumstances surrounding the loss of the thumb drive are being investigated," the statement reads.

Intelligent Business Research Services (IBRS) advisor, James Turner, said while the claims to possessing unclassified information on the USB stick could be exaggerated, the situation did show the need for organisations to utilise encryption, rather than data loss prevention.

"I'm presuming that the contractor was entitled to access the information they had on the USB key so DLP would have wished him a cheery safe trip and done nothing to stop the data being ported on to a USB key," he said.

"This is the same scenario that a number of our clients have been looking at and a common conclusion, and certainly one that I recommend, is enforcing USB encryption.

"Security should support the staff in what they are authorised to do and if that includes copying data onto a USB key and getting on a Qantas plane then so be it."