Malcolm Turnbull says authorities will have to rethink the design of places where large numbers of Australians gather in light of the Nice terror attack.
The Prime Minister has asked his top counter-terrorism adviser for ideas on how to prevent lone wolf attacks.
He wants Greg Moriarty to examine the recent attack in Nice and the background of the Sydney Lindt cafe siege to see if there are lessons for Australia to learn.
Mr Turnbull believes the inquiry should include looking at situations when people congregate, as happened when a Tunisian man drove a truck through a Bastille Day crowd in the French Riviera city, killing more than 80 people.
"We'll certainly have to rethink the way we design and protect places where large numbers of Australians gather," he explained to radio 3AW's Neil Mitchell on Friday.
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Despite the concern, he urged Australians to go about their lives and to report any suspicious activity.
"What we're seeing at the moment is people being radicalised or adopting murderous Islamist ideology very, very quickly," Mr Turnbull said.
"So you have people who are not on the counter-terrorism radar screen, who then often as a result of mental illness will then attach themselves to this murderous ideology and then act."
One theory states lone wolves are drawn to extremism not necessarily because of long-term religious or ideological beliefs but as a means of filling a void.
They can also be people who are not necessarily on the radar of intelligence services or police but are mentally or emotionally unstable.
Agencies will be asked to take a fresh look at their terrorist investigation watchlists to see if there are connections with mental health concerns or a history of crime.
Mr Moriarty says a one-size-fits-all approach will not succeed.
"The terrorist threat is deep, global and multi-dimensional," he said.
"The Prime Minister has discussed with me the need to position the country to be both secure and united, not just for tomorrow or next year, but for decades and possibly generations."
Not only did intelligence and security need improving but action should be taken to boost social cohesion.
The terror threat level has been at "probable" since September 2014, meaning individuals or groups have developed both an intent and capability to conduct a terrorist attack in Australia.
NSW Police Commissioner Andrew Scipione said Mr Moriarty was well known to the force and was sure to have a good look at the issue of mental illness.
Pointing to the Nice and other recent terror attacks he said "tell me that's not a person that's stable".
"I welcome anything we get from that review and from my perspective we need to do all we can and if that's part of the brief that's to be welcomed," he added.
