Prime Minister Tony Abbott said the advice was not based on knowledge of a specific attack plan but rather a body of evidence that points to the increased likelihood of a terror attack in Australia.

"Security and intelligence agencies are concerned about the increasing number of Australians working with, connected to, or inspired by terrorist groups such as ISIL (now known as Islamic State), Jabhat al-Nusrah, and Al Qaeda," Abbot said in a statement.

"The threat they pose has been increasing for more than a year. The first priority of the government is to ensure the safety and security of its citizens. Raising the alert level to high is designed to increase vigilance and raise awareness in the community,” he added.

Abbott said state and territory governments were notified of the decision to raise the threat level and federal and state law enforcement agencies would work to counter the terrorist threat.

"The government is also taking strong action to equip our security agencies and border protection agencies with the resources and powers they need to detect terrorist activities at home and prevent radicalised foreign fighters from returning to Australia," he said.

"What we do have is intelligence that there are people with the intent and the capability to mount attacks," he added.

The Prime Minister said the Australian security agencies had recommended the increased threat level because of the number of Australians "fighting with and supporting" terrorist groups in the Middle East.

The announcement took the threat level from medium, when an attack "could" happen, but stopped short of the highest warning level of extreme when an attack is "imminent".

It came two weeks after Britain raised its terrorism threat level and a day after US outlined its strategy for targeting Islamist militants in northern Iraq and Syria.

The British government lifted its alert from "substantial" to "severe", meaning that the threat of an attack was rated "highly likely".

ASIO chief David Irvine said the move was prompted by the growing number of Australians in the Middle East war zone.

He said there were now about 10,000 foreign fighters in the Middle East and a "large number", about 60 or 70, were Australian.

Latest News from World News Desk