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Teenage terror suspect is shot dead after two police officers stabbed

A terror suspect shot dead after he stabbed two Australian counter-terrorism police officers had his passport cancelled on national security grounds and had recently displayed what appeared to be a flag of the Islamic State group, police said.

Some experts suspect last night's attack was inspired by the Islamic State group's call to supporters to wage terrorism in their home countries.

An Australian Federal Police officer and a Victoria state police officer who were part of a counter-terrorism team had asked the 18-year-old to come to a police station in Melbourne to answer questions after first drawing their attention three months ago, Commissioner Ken Lay said.

The trio shook hands before the man began stabbing the officers. One of the officers then shot the man dead.

"The officer had no choice but to shoot," said police chief Luke Cornelius.

Police haven't released the suspect's name, but an opposition leader identified him in parliament as Numan Haider.

A second knife was found on the man after he was shot, police said. Both officers were in a stable condition.

The man had recently exhibited behaviours that had caused police "significant concern" including being seen waving what appeared to be an Islamic State flag at a shopping centre.

Australian Federal Police Acting Commissioner Andrew Colvin said the man's passport was cancelled about a week ago on national security grounds.

Brett Zarb, spokesman for GPT Group that owns the Dandenong Plaza shopping centre, said police had asked the mall for security footage of Haider's brief visit to the complex last Thursday.

Zarb said Haider had been accused of displaying the Islamic State flag at around 4pm that day. He did not create any disturbance, he said.

Asked about reports that the man had also threatened prime minister Tony Abbott, Colvin said the man had not made any "specific threats".

Abbott is en route to New York to attend a United Nations Security Council meeting on the 15,000 foreign fighters who are in Iraq and Syria.

"Obviously this indicates that there are people in our community who are capable of very extreme acts," Abbott said in a video message from Hawaii.

A statement issued by Islamic State group spokesman Abu Muhammad al-Adnani and made public this week asked Muslims to use all means to kill a "disbelieving American or European - especially the spiteful and filthy French - or an Australian or a Canadian" or others whose countries are trying to disable the group.

Australian Professor of National Security Michael Wesley blamed the statement for the attack.

"I think that this attack occurring in the context of the fatwa that came out earlier this week, a fatwa that implored followers to attack infidels," he said