Video filmed by a Melbourne bus passenger shows two men verbally abusing a woman who is reported to have been singing in French YouTube/viralmedia2012

Police in the Australian city of Melbourne are investigating the verbal abuse of a French-speaking woman travelling on a bus in which she was told by a man to "speak English or die". The verbal abuse, captured on video by another passenger, shows a second man threatening to cut the woman with a knife.

"I'll fucking boxcutter you right now, you bitch, if you talk to my missus like that," said the male passenger, who was pushing a baby buggy, during the footage, which sparked national discussion on the level of racism and xenophobia in Australia. To varying degrees all Australian states and territories have laws against racial vilification.

The incident began after the woman started singing a French song, according to another passenger on the bus, Mike Nayna. Nayna – whose YouTube video drew attention to the ugly incident – said another female passenger on the bus started to chant "Aussie, Aussie, Aussie" in reply. Nayna, a comedian who turned the footage into an extended commentary on racism in Australia, said the French woman continued to sing, prompting a tirade of abuse from another male passenger.

"Speak English or die, motherfucker," the abuser says in the video. He then appears to threaten to "cut the bitch's tits off". Melbourne, Australia's second-largest city, has large migrant communities and the spread of the video is a setback for the image it cultivates of being Australia's most culturally sophisticated metropolitan centre.

Media outlets described the incident as "shocking" and an ugly attack. One columnist described the perpetrators of the abuse as idiots who were being "caught on camera to their shame, and to our international embarrassment".

Listeners to one of Melbourne's talk back radio stations, 3AW, described the verbal attack as "disgusting" and "embarrassing". One said: "To the poor woman who had to endure such abuse, I hope you don't think all Australians act like this because we don't. The guy needs to be taught a lesson." A spokeswoman from the French embassy in Australia, Lydie Bertrand, said the embassy has not been contacted by the woman who was the target of the abuse. "We disapprove of such attitudes towards these young French girls. The incident is regrettable but isolated," she said.

Nayna told Melbourne's Herald Sun newspaper: "It was just weird mob mentality. They [the abusers] were feeding off each other and breaking off into rant and encouraging each other over some racist stuff. It was like a bonding session."

Nayna said another of the passengers offered the abuser a beer and the use of his fishing knife. "Then he went off in a rant about filleting people and saying 'They're just scared cunts at the back of the bus'." One of the men who had shouted abuse at the French woman got off the bus with his wife and child and taunted the victim to get off as well. "Yeah, come on cunt, get off. Fucking ding, look at ya. You've been told about four times, get off," he said. Moments after he stepped off the bus he apparently smashed one of the bus windows, shocking passengers who called out for the driver to shut the doors and drive off. The other abuser told the French woman that everyone on the bus wanted to kill her and that she would have to "get off eventually, bitch". Victorian police say they are investigating the incident, which took place on 11 November at about 10.30pm, and have called for witnesses to come forward.

The case has fuelled debate about xenophobic and racist attitudes in Australia. In 2010 India issued a travel warning to its citizens intending to come to Australia after the fatal stabbing in Melbourne of a 21-year-old Indian student. Other Indian students held protests, claiming attacks on them were motivated by racism and were not being addressed by the Australian government. Indian students are the second largest group of international students studying at a tertiary level in Australia. Their enrolments dropped by 30% in 2011 and by another 26% in 2012.

In 2005 several days of racially motivated mob riots were whipped up in the Sydney beachside suburb of Cronulla and neighbouring communities by reports of an attack on volunteer lifesavers by Middle Eastern men.

In May a British woman was sentenced to 21 weeks in jail for racially abusing passengers on the tube in London. Jacqueline Woodhouse, 42, from Romford in Essex, launched her abusive verbal attack on several passengers on the Central Line. A seven-minute video of the tirade has been watched by more than 200,000 people on YouTube. Among her remarks, Woodhouse asked passengers around her: "Where do you come from? All over the world, fucking jokers. Fucking country's a fucking joke.

"I would like to know if any of you are illegal? I am sure 30% of you are. Fucking jokers taking the fucking piss."

The judge said Woodhouse would spend half of her sentence behind bars and was banned for five years from using the London underground and Docklands Light Railway network while drunk.