Attorney General Philip Ruddock told legislators in Canberra on Wednesday the government had an obligation to protect the Australian public from "terrorism".
"People should be able to live without fear of terrorist groups being able to operate within our borders with impunity," Ruddock said.
The new law has outraged minor opposition parties who say it could, if abused, lead to the abolition of many parties without "terror" connections, but who oppose the government.
After two years of wrangling, the main opposition Labour Party agreed to support the new law, meaning it could pass the Senate, where the government does not have a majority.
"People should be able to live without fear of terrorist groups being able to operate within our borders with impunity"
Labour said it had decided to support the legislation after the government agreed to include safeguards that give Parliament the power to veto the listing of an organisation, and require the attorney-general to consult with the opposition leader and state and territory leaders before listing any group.
Robert McClelland, Labour's spokesman on homeland security, said the opposition had worked hard to ensure appropriate safeguards were in place.
"Those safeguards involve consultations, with not only the leader of the opposition, but also state and territory leaders," McClelland said.
But Andrew Bartlett, leader of the centre-left Australian Democrats Party, said Labour's support for the bill would hand Howard's conservative government almost absolute power.
Ruddock also hinted the government of Prime Minister John Howard might seek to further bolster "anti-terror" laws, saying the government would keep the laws under review.