'Less than 0.1 per cent of Australian Muslims are a security interest'

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The head of Australia’s domestic spy agency says it investigates people based on their behaviour, not their background.

The head of the Australian Security Intelligence Organisation has defended the Muslim community while updating politicians on Australia's terror threat.

In an appearance before a Senate estimates hearing in Canberra on Tuesday, ASIO boss Duncan Lewis said: "There are more than half a million Australian Muslims. Of these... less than point one of one per cent, so one-tenth of one per cent, are the subject of security interest".

"Traits such as ethnicity do not necessarily help us to identify the individuals who are of concern."

ASIO said the threat from terrorist group IS continued but the group had faced significant physical losses in conflicts in Mosul, Raqqa and Marawi.

"These losses do not eliminate the threat ISIL poses to Australia and Australian interests globally," he said.

"ISIL propaganda remains a powerful force for radicalisation and incitement and the threat from ISIL-inspired lone actors and local groups will endure.

In previous estimates appearances, Mr Lewis had colourful exchanges with One Nation Leader Pauline Hanson about the threat of Islamist extremism.

In response to questions from Labor Senator Kimberley Kitching, Mr Lewis also maintained the long-standing government position that up to between 68 and 85 Australians had been killed in the Middle East while fighting with IS.

"There's always a gap between the ones we can confirm and the ones we suspect may have been killed," he said.

He also said approximately 40 foreign fighters had returned to Australia.

"The overwhelming majority of them returned to Australia before ISIL was declared as a so-called province, this caliphate," he said.

"Every returnee who comes back from the Middle East is included in what is a whole of government framework on where they fit in and the treatment that needs to be applied to that individual."

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