An 18-year-old man has been shot dead in Australia by police after he stabbed two officers outside a police station in Melbourne.

The man, who local media said was of Afghan origin, had his passport suspended a week ago and had been summoned to appear at the station.

He was alleged to have displayed a flag linked to the extremist group ISIS in a shopping centre and to have been a terror suspect.

Chief Commissioner of Victoria state police, Ken Lay, said: “There is certainly information that he was present at a shopping centre in the last week or so with a flag that appeared to be an ISIS flag, yes.”

Australia has recently carried out sweeping raids across the country after an apparent plot to behead a member of the public.

The government says at least 100 Australians are in the Middle East involved with militant groups. Prime Minister Tony Abbott warned the balance between freedom and security “may have to shift.”

“Obviously this indicates that there are people in our community who are capable of very extreme acts. It also indicates that the police will be constantly vigilant to protect us against people who would do us harm,” Abbott said.

The Grand Mufti of Australia and other Muslim leaders condemned the incident.

They also said they had since received threats from right wing extremists to bomb Australian mosques.

The leaders called on the government to deal with Islamophobia and discrimination which can play into feelings of alienation and frustration among young Muslim men.