Two men accused of planning an act of terrorism knelt before an Islamic State flag and pledged to stab the kidneys and necks of Australians.
Prime Minister Tony Abbott has told parliament security agencies have shown him a video in which the men make the pledge.
"I swear to almighty Allah we will carry out the first operation for the soldiers of the caliphate in Australia. I swear to almighty Allah, blond people, there is no room for blame between you and us. We only are you, stabbing the kidneys and striking the necks," he quoted them as saying.
He described the contents of the video, seized during police raids in Sydney on Tuesday, as "monstrous extremism".
"I don't think it would be possible to witness uglier fanaticism than this, monstrous extremism than this," he said.
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The accused, Omar al-Kutobi, 24, and Mohammad Kiad, 25, are due to appear by video-link in court shortly.
Mr Abbott said Australia needed its security agencies more than ever as it faced a metastasising threat.
"Under the influence of the Islamist death cult, all you need to be a terrorist is a knife, a flag, a camera phone and a victim. That's all you need," he said.
"We must defeat this threat and I am confident that this government has the will to do so."
