PRIME Minister Malcolm Turnbull has warned Australia must be "very alert" to terror threats, after an Islamic State propaganda magazine called for "lone wolf" attacks in Sydney and Melbourne.

Already the threats have been played down by Victorian Police and Premier Daniel Andrews.

But the Prime Minister warned that as Islamic State or "Daesh" come under pressure on the battlefields of Syria and Iraq, it will attempt more terror attacks outside the Middle East, potentially targeting recruits with mental illness.

Mr Turnbull said while Australia had the "finest security, intelligence and police forces in the world", it showed the importance of working with neighbouring countries to fight terrorism.

"We need, more than ever, to cooperate closely, to engage intimately with our neighbours in the fight against counter-terrorism," he said.

"Sharing of intelligence is more important than ever before. And so counter-terrorism, too, is going to be a key focus of these meetings over the next few days."

When asked if Australia ought to be worried about these threats, Mr Turnbull said "of course" there were concerns.

"We do have to be very alert to the actions of these lone actors," he said.

Individuals who - as I've described in the national security statement last week - individuals who for a variety of reasons may be radicalised, often associated with mental illness, frankly, can be radicalised very quickly and engage in very destructive, lethal conduct, as we saw in Nice, for example.

"Every time there is a terrorist incident, wherever it is in the world, we learn as much as we can about it and then take those learnings to keep Australians more safe."

Earlier Victorian Police Chief Commissioner Graham Ashton said the IS threat was made in a re-print of an propaganda sheet that appears in different languages.

The poem that refers to Australia mentions Brunswick, Broadmeadows and the MCG in Melbourne, plus Bondi and SCG in Sydney.

"The suburbs that are mentioned are substituted with local locations in those countries in those languages as well," he said.

"This will continue to be assessed, but there's nothing at this stage to suggest there's any specific threats that we need to action immediately in relation to those particular suburbs or those sporting locations."

Mr Andrews said the "evil document" calls on people to commit terrible crimes but "we send a very clear message that we will not be intimidated by these sorts of cowardly threats".

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