Tech companies would be obliged to help government agencies decrypt communications under new laws bound for federal parliament.
Home Affairs Minister Peter Dutton says ubiquitous encryption - a tool used for secure personal banking platforms and some messaging services - has become a major obstacle to terror investigations.
"We know that more than 90 per cent of counter-terrorism targets are using it for communications, including for attack planning here," Mr Dutton told the National Press Club in Canberra on Wednesday.
"Decryption takes time, a precious commodity when threats may materialise in a matter of days or even hours."
Mr Dutton said he didn't want a "backdoor key" to encrypted devices or a licence to hack into services.
But he argued law enforcement access to encrypted communications should be on the same basis as telephone and other intercepts, in response to warrants issued by the court.
"Companies ought to be concerned with the reputational harm that comes from terrorists and criminals using their encryption and social media platforms for illicit ends," he said.
"As a society we should hold these companies responsible when their service is used to plan or facilitate unlawful activity."
Mr Dutton was willing to work with companies involved, but would also introduce legislation to force them to cooperate.
The Turnbull government has for many months been pushing the the United States, UK and its other intelligence allies on the need to crack down on encrypted technology in the fight against terrorism.
It has previously described the issue as one of the biggest challenges facing law enforcement and security agencies worldwide.
