Terrorist propaganda posted on social media and the internet will be monitored and analysed under an $18 million plan announced by the Abbott government.
Attorney-General George Brandis announced the plan while attending a White House summit on violent extremism in Washington.
Islamic State is estimated to post up to 100,000 messages a day online.
Senator Brandis' department will set up a social media monitoring and analysis unit and work with the Australian Communications and Media Authority and the private sector to take down extremist content.
The government will also produce online material that challenges the claims of terrorists and promotes Australia's values.
A third of the funding will go to community groups to work with young people to reject terrorist propaganda.
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