Foreign Minister Julie Bishop said Tuesday Canberra was treating as genuine a call by the Islamic State group for Muslims to indiscriminately kill Australians, issued after anti-terrorism raids foiled an alleged abduction plot.

The militants on Monday released a statement urging the deaths of citizens of all countries taking part in the US-led coalition against the jihadists. Australia was mentioned, along with the United States, Canada and France.

Shortly after, an Algerian group linked to Islamic State claimed the kidnapping of a French national and threatened to kill him within 24 hours unless Paris halts air strikes in Iraq.

On Tuesday evening a man who reportedly made threats against Australian Prime Minister Tony Abbott was shot dead by police in a Melbourne suburb after stabbing and injuring two officers, media reports said.

ABC News said it was understood the dead man was being "investigated over terrorism" and recently had his passport cancelled.

The incident happened in Endeavour Hills, a suburb of the southeastern city.

Bishop told national radio that Australia was clearly a target, just hours before the US and Arab allies unleashed bombs and Tomahawk cruise missiles on IS targets in eastern Syria.

"Our agencies are treating this threat as genuine and it's quite apparent that ISIL (Islamic State of Iraq and the Levant) is prepared to take on anyone who doesn't share its views," she said.

"So we are a threat, not because of what we're prepared to do to combat ISIL but because of who we are.

"ISIL is killing Shia, Sunni, Kurds, Christians; they're killing aid workers, journalists," Bishop added from New York, where she is attending UN meetings.

"So no-one is safe in their presence. That's why we're so committed to containing and degrading and destroying ISIL as far as we can in cooperation with other countries."

The threat against the coalition members came just days after anti-terrorism raids in Sydney and Brisbane sought to disrupt an alleged plot by IS supporters to abduct and behead a member of the public.

Abbott told parliament on Tuesday that Australian citizens should not be cowed by the threats.

"Everything we do at home and abroad is directed against terrorism, not religion and I urge Australians to go about their normal lives because the whole point of terrorism is to prevent us from being ourselves," he said.

Universal condemnation

Australia has deployed 600 troops to the United Arab Emirates to join the international coalition gearing up for a campaign to eradicate the jihadists.

It is also sending eight RAAF F/A18 combat aircraft, with Defence Minister David Johnston saying in Baghdad late Monday that they had been deployed "to participate in a US-led coalition in delivering air strikes".

So far Australia has only been involved in dropping humanitarian and military aid to Iraqis under siege. It has repeatedly ruled out any intervention on the ground.

Bishop said she held meetings on Monday with Arab League nations and that they were committed to supporting Baghdad in its battle against the jihadists, who have declared a "caliphate" straddling Iraq and Syria.

"There is universal condemnation of ISIL and there is a universal commitment to working in cooperation to stop this threat from spreading beyond the Middle East and most certainly containing and destroying it in Iraq and Syria," she said.

The Australian government believes up to 60 Australians are fighting alongside IS jihadists, while another 100 are actively working to support the movement at home.

It has sparked fears that they could return to carry out attacks, with the government tightening its counter-terrorism laws.

"I want to make it absolutely crystal clear again that fighting with a terrorist group is a serious crime under Australian law," Abbott told parliament Tuesday.

He added that "if you fight with a terrorist group, if you seek to return to this country, as far as this government is concerned, you will be arrested, you will be prosecuted and you will be jailed for a very long time indeed".