A 22-year-old man charged with a terrorist attack in south-west Sydney was inspired by the Islamic State group, NSW Police allege.

Ihsas Khan is accused of stabbing 59-year-old Wayne Greenhalgh a number of times at a reserve on Olhlfsen Road at Minto on Saturday afternoon.

The victim suffered injuries to his body and hands, and remains in hospital in a serious condition.

Khan has been charged with committing a terrorist act and attempted murder.

He has appeared in Parramatta Bail Court, where he was denied bail. He is due to reappear in court next week.

"We will be alleging before court that this was an act inspired by ISIS, it was a deliberate act, it resulted in a person receiving extremely serious injuries," NSW Deputy Police Commissioner Catherine Burn said.

Witnesses have told the ABC Mr Greenhalgh ran into a nearby hair salon to flee his assailant.

Blood on the floor of a Minto hair salon where the victim of the alleged terror attack ran to. ( ABC News: Jackson Vernon )

Khan is known to police but not for links to any known terror groups, Deputy Commissioner Burn said.

"We know that this person has strong extremist beliefs inspired by ISIS," she said.

"[He is] not someone who was front and centre in our work at the moment.

"We don't believe he was connected with any terrorist group. This is the challenge."

When police arrived at the scene on Saturday, Khan allegedly attempted to stab an officer through the car window.

"We will allege that he was going to attack [the officers] also," Deputy Commissioner Burn said.

Salon owner sheltered stabbing victim

The husband of the salon owner said his wife's actions helped save Mr Greenhalgh after another neighbour also intervened.

"My neighbour's come home, just a freak of timing, he's come home at exactly the right time from his son's football game," Andrew Horton said.

"[He] saw that the attacker had a knife, [he] got out of the car and threw the door open, and it sort of blocked the bloke a bit, apparently."

The owner of the Minto hairdressing salon took the victim in. ( ABC News: Jackson Vernon )

The man did not witness the incident but said his wife told him the victim sought shelter in her nearby salon, where she was.

"She's seen that he's been knifed, she saw the blood pouring out of him, and seen that the fella's not far behind him ... but she's had the sense to lock the door," he said.

Mr Horton said the alleged attacker tried to break the glass door of the salon but it held, and police arrived a short time afterwards.

A large knife was taken from the scene for forensic examination by police.

Mr Horton said Mr Greenhalgh is married and has three children.

Victim's wife had earlier seen attacker 'acting strange'

Mr Greenhalgh's wife Bronwen said she and her husband saw Khan earlier on Saturday acting suspiciously.

"Just in the morning [he] came out of his house [and] just walked towards us," she said.

"We thought he was going to ask us something and then he just turned around and went back home and he had a little book in his hand with Arabic writing on it.

"I said to Wayne a couple of times [on Saturday] that was really strange."

Deputy Commissioner Burn said there had "clearly been some degree of planning", but it was not known for how long.

Neighbours have told the ABC that a man in the area had been acting suspiciously for the past year.

PM highlights similarities with 9/11

The reserve at Minto in south-west Sydney where the stabbing happened. ( ABC News )

Prime Minister Malcolm Turnbull said there similarities between the incident and the 9/11 terrorist attacks in the United States 15 years ago.

"On one level, they seem very different. But connecting them both is a violent Islamist ideology which perverts the religion of Islam and seeks to destroy and threaten our way of life," Mr Turnbull told reporters.

He said another connection was the heroism of members of the public at the scenes of both events.

Attorney-General George Brandis earlier paid tribute to police officers as well as members of the public who helped the victim at the scene.

"It may very well be but for the bravery of those citizens, who intervened, the victim's life would have been lost," Senator Brandis said.

Since the terror threat level was raised two years ago, police and security agencies had "interdicted and prevented another 10 [incidents]", Senator Brandis added.

The Federal Government will introduce two new pieces of anti-terrorism legislation to Federal Parliament this week.

The first will see the introduction of control orders for offenders as young as 14 years old, while the other will allow authorities to detain convicted terrorists who have finished their sentences if they are deemed to be a risk to the community.

The High Risk Terrorism Offenders legislation is similar to arrangements in some states for sex offenders and follows an in-principle agreement struck with state and territory governments.

"Sadly there are some cases where a person who has been convicted and imprisoned for a terrorism crime, after they have served their sentence, is nevertheless unreformed, is nevertheless just as determined to pursue their terrorist intentions as they were the day they entered the prison walls," Senator Brandis said.

Senator Brandis said the two pieces of legislation had been in planning for a number of months and was not in response to the alleged attack in Minto.