Immigration and Border Protection Minister Peter Dutton on Monday told a meeting of global counter-terrorism experts in Melbourne that as IS loses its grip in the Middle East it's increasingly relying on online recruitment.
And the use of encrypted mobile applications is making the job of thwarting plots more difficult.
"The unfortunate reality is that there has been a significant and ongoing deterioration of the threat environment," Mr Dutton said.
There have been five terror attacks in Australia since the national threat level was increased to 'probable' in September 2014, Mr Dutton said.
Across the country, 35 counter-terrorism operations have resulted in 80 people being charged, with 42 still before the courts, including five juveniles.
And in the past five years, 220 Australian passports have been cancelled or refused over the conflict in Syria and Iraq, as 40 foreign fighters have returned.
"Standing still in the current environment adds up to going backwards," Mr Dutton said.
Victoria Police is hosting the first Leadership in Counter-Terrorism (LinCT) International Counter-Terrorism Forum to be held outside of the United States and assistant commissioner Shane Patton told delegates the state has had seven foiled or successful terrorist plots since September 2014.
"We know that responding to terrorism is not something a single organisation, a single government or a single country can manage in isolation, that's why we're all here, as partners, to jointly confront this threat," he said.
Mr Patton earlier warned the Christmas festive season was becoming a peak time for attacks across the world.
"We are making sure ... that we are properly prepared for this time of year because unfortunately, it does seem we have an escalation of events around this time," he told reporters.
Iraqi Prime Minister Haider al-Abadi announced over the weekend that its forces had rid the country of ISIS, but Prime Minister Malcolm Turnbull and Foreign Minister Julie Bishop said it was not the end of terrorism.
"While today's announcement by the Iraqi government is an historic moment, Iraq's liberation does not mean the fight against terrorism and ISIS in Iraq is over," they said in a statement on Sunday.
