Lawyers for a Sydney man charged after high-profile counter-terrorism raids in Sydney have accused Prime Minister Tony Abbott of providing misleading information to the public about the case.

Omarjan Azari, 22, was arrested after raids involving 800 police officers in Sydney and Brisbane in September.

He was accused of conspiring to prepare for a terrorist act — namely, to kill a random member of the public — and of making funds available to the Islamic State (IS) terrorist group.

His application for bail was refused today after a magistrate found his lawyers failed to establish there were exceptional circumstances to warrant his release.

During the hearing, Azari's barrister Steven Boland accused Mr Abbott of an "unprecedented intrusion" in the case.

He took particular exception to Mr Abbott's comments at the time that all that was needed to commit a terrorist attack was an iPhone, a victim and a knife.

He also raised concerns about the Mr Abbott's suggestion that an attack would have occurred within days.

Mr Boland said it was "an unprecedented intrusion by the Prime Minister into the criminal process".

"Mr Abbott has provided misinformation, deliberately or otherwise," he added.

Mr Boland said the Prime Minister's actions gave rise "to the significant possibility of a successful stay application", which would prevent the court from proceeding with the matter.

The defence also argued the crown case relied on a telephone call made by Australian IS figure Mohammad Ali Baryalei.

"Unless they can point to an overt act [by Azari], the indictment is defective," Mr Boland said.

Baryalei suggests Azari kill a tourist

A transcript of telephone calls between Azari and Baryalei on September 14, 2014 were read to the court.

In the calls Baryalei instructs Azari to kill a random civilian on the street and then put up an IS flag.

"Finish him, finish her, when you are finished, put the flag in the background," Baryalei said.

"If you kill our people, we will also kill your people one by one."

He then suggested that Azari kill a tourist from the United States, United Kingdom or France.

"A person who is a tourist or backpacker, American, French or British, that's even better," Baryalei said.

"Yeah, yeah," Azari agreed.

The defence also argued Azari's custody conditions at Goulburn's Supermax prison were excessively onerous for someone with no criminal conviction.

The crown objected to the defence's request to tender media coverage of the case, saying the entire subject was irrelevant to a bail application.

The hearing continues.