Australia should give more humanitarian aid to help those displaced in Syria and Iraq as part of its counter-terrorism efforts, says a top defence think-tank.
It should also contribute money to an international fund and make a case to rebuild infrastructure destroyed in the afflicted countries.
The Australian Strategic Policy Institute's Ashley Collingburn says it's insufficient to focus solely on defeating Islamic State militarily.
"The environmental factors must also be addressed, or there's significant risk that the IS will again transition to underground guerilla operations, rejuvenate and wait for the opportunity to recommence offensive operations," he wrote in a paper released on Tuesday.
In addition to diplomacy, Mr Collingburn recommends Australia increase humanitarian assistance funding and boost its refugee intake.
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It should also make the case for the international community to help rebuild Iraq and Syria.
"The Australian government should contribute financially to an international reconstruction fund, (but) all support should be explicitly conditional on the achievement of clearly defined milestones."
Combating terrorism on home soil, however, should remain the highest priority.
Attacks by IS-inspired individuals and returning foreign fighters are the most likely and immediate threat to Australia's national security, Mr Collingburn said, but a more complex plot remains possible.
Authorities must closely monitor returning foreign fighters, review the Australian Defence Force's role in domestic counter-terrorism efforts, and audit its countering violent extremism programs, he said.
