By Matt Siegel
SYDNEY (Reuters) - Militants connected with radical group Islamic State were planning to behead a member of the public in Australia, Prime Minister Tony Abbott said on Thursday, after hundreds of police raided homes in a sweeping counter-terrorism operation.
Abbott said there was a "serious risk from a terrorist attack" days after Australia raised its national terror threat level to "high" for the first time, citing the likelihood of attacks by Australians radicalised in Iraq or Syria.
Australia is concerned over the number of its citizens believed to be fighting overseas with militant groups, including a suicide bomber who killed three people in Baghdad in July and two men shown in images on social media holding the severed heads of Syrian soldiers.
More than 800 police were involved in the pre-dawn security operation in Sydney and Brisbane, which was described as the largest in Australian history and resulted in the detention of 15 people, police said.
Abbott told a news conference that members of the radical group had planned to conduct a public beheading.
"That's the intelligence we received," he said.
Media reported that the plans included snatching a person at random in Sydney, Australia's largest city, and executing them on camera draped in the group's black flag.
"The exhortations, quite direct exhortations, were coming from an Australian who is apparently quite senior in ISIL to networks of support back in Australia to conduct demonstration killings here in this country," Abbott said, referring to the group otherwise known as Islamic State that has seized large swaths of territory in Syria and Iraq.
Sydney man Omarjan Azari, 22, appeared in court after the raids. He has been charged with conspiracy to commit a terrorist act and will remain in custody until a hearing in November, authorities said.
Prosecutor Michael Allnutt told the court in Sydney that an attack was being planned that "was clearly designed to shock and horrify, perhaps terrify" the community, the Sydney Morning Herald reported.
Azari's lawyer, Steven Boland, did not apply for bail. Boland told the court the allegation was based on one phone call, according to media reports. Boland was not available for comment.
MORE POLICE ON THE STREETS
Police said the raids were focused in western Sydney and the Queensland state capital of Brisbane, where two men were arrested on terrorism-related charges last week.
About half of Australia's population of roughly 500,000 Muslims lives in Sydney, with the majority in the western suburbs where the raids occurred.
New South Wales Police Commissioner Andrew Scipione said he had ordered more police onto the streets after the raids to prevent "troublemakers" taking advantage of the tension.
But In western Sydney's Lakemba neighbourhood, which is home to one of the country's largest Muslim populations, there was little sign on Thursday of any increased security presence.
Several residents interviewed by Reuters said they had not heard about the raids and expressed disbelief about the plot.
Osama Farah, a 40-year-old university student, said the raids were part and parcel of the Australian media's unfair portrayal of Muslims as fanatics.
"There are idiots everywhere. Jews, Christians, Muslims, everywhere. They must take things to the extreme because they are sick in their heart," he said. "But to take this tiny portion of the population ... it's unfair."
Samier Dandan, president of the Lebanese Muslim Association, one of the country's most influential Muslim organisations, told Reuters that the raids had the potential to inflame relations between the authorities and the community.
"I hope they have very solid facts, because if they don't, this is going to be the basic platform from which the community engages with law enforcement moving forward from here," he said.
Treasurer Joe Hockey insisted that the necessary precautions had been put in place for a G20 leaders summit Australia is set to host in November, and dismissed concerns the raids could disrupt a meeting of G20 finance ministers this weekend in the tropical northern city of Cairns.
DISTRACTING ATTENTION?
Australia had been at the "medium" alert level since a four-tier system was introduced in 2003. A "high" alert level is used when officials believe an attack is likely, while a "severe" level means they believe an attack is imminent or has occurred.
Abbott, whose conservative Liberal-National coalition has struggled in the polls since winning elections last year, is pursuing an increasingly muscular foreign policy that has moved him closer to the United States on crises like Iraq and Ukraine.
Voter support for the coalition tanked after introducing an unpopular budget in May, but his tough stance over the shooting down of a Malaysia Airlines plane in Ukraine in July boosted its popularity.
Lakemba resident Yussuf Badreddine, 39, told Reuters he suspected the raids and terror threat level rise were aimed at distracting attention from welfare cuts in the budget.
"If you see now, nobody talks about the budget. Nobody talks about the cuts to Medicare. They want to cover up what they've done? Terrorism," he said.
But Attorney General George Brandis dismissed the suggestion the government would rather be talking about terrorism.
"Well, I wouldn't rather be talking about this. I would rather that this not be happening," he told ABC Radio.
Up to 160 Australians have either been involved in fighting in the Middle East or actively supporting it, officials have said. At least 20 are believed to have returned to Australia and pose a security risk, the head of the national spy agency said last week.
Highlighting the risk of homegrown militants returning from the Middle East, Abbott pledged on Sunday to send a 600-strong force as well as strike aircraft to join a U.S.-led coalition fighting Islamic State militants in Iraq.
(Additional reporting by Lincoln Feast and Thuy Ong; Writing by Paul Tait; Editing by Dean Yates and Robert Birsel)