Counter-terrorism police in Australia say they prevented an imminent attack linked to Islamic State after arresting two suspects.

New South Wales Deputy Police Commissioner Catherine Burn said: "When we did the search of the premises, a number of items were located, including a machete, a hunting knife, a home-made flag representing the prescribed terrorist organisation IS, and also a video which depicted a man talking about carrying out an attack. We will allege that both of these men were preparing to do this act yesterday."

Australia has been on heightened alert for attacks by home-grown Islamic radicals.

In December, two hostages were killed when policed stormed a central Sydney cafe to end a 17-hour siege.

The gunman in the attack, who wanted to align himself with the Islamic State group, was also killed.