Australian police foil potential terror attack after two men are arrested in Sydney

Officers found a machete, a hunting knife and a home-made Isis flag at a premises in the suburb of Fairfield

Australia has been on terror alert since a 16-hour siege at a Sydney cafe in December resulted in three people, including the gunman, losing their lives (Getty Images)

Counter-terrorism police in Sydney say they have thwarted an imminent attack linked to Isis militants after arresting two men.

The pair, understood to be aged 24 and 25, were arrested in the Sydney suburb of Fairfield on Tuesday after police found a machete, hunting knife, a flag and a video tape during a counter-terrorism raid. Both were denied bail and are expected to appear in court later today.

“When we did the search of the premises, a number of items were located, including a machete, a hunting knife, a home-made flag representing the prescribed terrorist organisation Isis, and also a video which depicted a man talking about carrying out an attack,” New South Wales Deputy Police Commissioner Catherine Burn told reporters. “We will allege that both of these men were preparing to do this act yesterday.”

Australia is on high alert after the death of two hostages in December as police stormed a cafe in central Sydney where 18 people were held during a 16-hour siege.

The gunman, Man Haron Monis, who also died, was a self-styled sheik who harboured deep grievances against the Australian government and sought to align himself Isis extremists.

More widely, Australia a staunch ally of the US in the war against Isis, has conducted numerous arrests since Australia raised its national terror threat level to “high” for the first time last September, citing the likelihood of attacks by Australians radicalised in Iraq or Syria.

At least 70 Australians are thought to be fighting with jihadi groups in Syria and Iraq, with more than 15 reported killed so far in conflicts, including the country's first two suicide bombers.

Last year the government said it believed about 100 Australians are actively supporting extremist groups from inside the country, recruiting fighters and grooming more potential suicide bombers, as well as providing funds and equipment.