Prime Minister John Howard said the increased funding and a huge counter-terrorism exercise next Monday would improve defences against possible chemical and biological attacks.
Speaking to a fund-raising Liberal party lunch in Adelaide, Howard added: "We will continue to argue the case for remaining part of the worldwide effort to fight terrorism."
"We will not desert our friends. We will not desert our allies because to do so would be to betray our own future and to leave us more ... vulnerable to terrorist attacks in the future."
"This country has been a terrorist target for some time now because of who we are, what we stand for and what we believe in."
The increased funding, to be included in the May budget, will take total expenditure on national security to almost $3 billion dollars since the 9/11 attacks.
The extra $300 million will go to the Australia Security Intelligence Organisation, the Australian Secret Intelligence Service (ASIA) and the Federal Police - which played a key role in the hunt for those responsible for the 2002 Bali bombings which claimed 202 lives.
|Spy chief Dennis Richardson says |
US alliance is cause of threat
Foreign Minister Alexander Downer called on other countries to follow suit and increase security cooperation.
Downer also urged Spain to reconsider withdrawing its troops from Iraq, saying such a move would hand victory to al-Qaida.
"We must not walk away and think that, through pursuing a policy of appeasement and weakness, somehow we are going to win that war or make ourselves immune from attack."
But ASIA director-general Dennis Richardson said on Wednesday Australia's close alliance with the United States had increased the risk of attack.
Attorney General Philip Ruddock said the Mercury 04 exercise would be carried out over five days from Monday in Tasmania, South Australia, Victoria and the Northern Territory.
"Mercury 04 will demonstrate Australia's well planned and coordinated approach to national security."
"A range of complex terrorism scenarios will also be managed throughout Mercury 04, which will provide an opportunity for some of the jurisdictions to test new chemical, biological and radiological equipment and critical infrastructure protection."