Tony Abbott has warned that the number of homegrown Australian terrorists is rising and they are increasingly hard to detect as he unveils major changes to Australia's national security regime.
The Prime Minister says he will create a counterterrorism tsar to co-ordinate efforts to combat terrorism, emulating the tactic to stop asylum seeker boats.
In his national security statement to Parliament, Mr Abbott will flag the line between individual freedoms and community safety may be redrawn amid the growing terror threat.
His speech comes after yesterday's release of the joint Federal-NSW report into the December 15 Lindt Chocolate Cafe siege when gunman Man Haron Monis held 18 people hostage for 17 hours.
Monis executed cafe manager Tori Johnson before the gunman and hostage Katrina Dawson were also killed.
The report cleared police, security, health and welfare agencies and the justice system for failing to detect Monis posed a risk, finding they exercised "reasonable" judgment during numerous contacts with him during his 18 years in Australia.
But Mr Abbott said "plainly the system has let us down". "This guy shouldn't have been in the country, he shouldn't have been out on bail, he shouldn't have had a gun and he shouldn't have been radicalised to the extent that he claimed to be conducting an Islamist death cult attack here in Australia," the PM said.
Monis had a history of offensive letters and was on bail over his alleged involvement in his ex-wife's murder but Mr Abbott said the system failed when it constantly gave him the benefit of the doubt.
"We don't believe that at any particular decision-making point grievous errors were made but the totality of decision-making let this monster loose in our community," he said.
"He shouldn't have been allowed into the country. He shouldn't have been out on bail.
"He shouldn't have been with a gun and he shouldn't have become radicalised."
The report revealed that between December 9 and 12, the national terror hotline received 18 calls and emails about offensive Monis online posts. However, NSW and Federal Police and ASIO deemed the posts did not indicate an imminent threat.
ASIO also assessed Monis that month as "well outside" its 400 priority terror investigations.
The report concluded authorities "never had information to indicate Monis had the intent or desire to commit a terrorist act".
Mr Abbott said it was "perfectly appropriate" that NSW Police responded to the Sydney siege, despite claims the army should have.
The Prime Minister will today release the Government's response to a broader review of counterterrorism operations. He said it found Australia was in a new long-term era of raised terror risks with a much bigger homegrown element.
He said foreign fighters, known sympathisers and supporters of extremists were increasing and the number of potential terrorists, including at home, was also rising.
Mr Abbott said it was now harder to anticipate and disrupt lone terrorist acts and the number of priority inquiries had doubled to 400 in a year.
The review ruled out restructuring police and security agencies but recommended closer liaison, overseen by a national counterterrorism co-ordinator "to bring the same drive, focus and results that worked so well to stop the boats", he said.
Mr Abbott said 20 people had been charged with terror offences since September - one-third of all terror charges since 2001.
He has already flagged tighter migrant screening, stripping dual citizens of visas and passports, a crackdown on hate preachers and banning the Hizb ut-Tahrir group.
This could affect WA student Muhammed Sheglabo, who is fighting for the barbaric Islamic State.