Assistant Multicultural Affairs Minister Julian Hill used a speech at the McKell Institute in Sydney on Wednesday to argue progressive patriotism was the solution as extreme right and left-wing ideologies threaten community harmony.
In the post-Bondi terror attack era, he said Australia was not immune to "forces of hatred" that could spiral out of control if left unchecked.
Such hatred was stoked by the far-right, Mr Hill said, calling out One Nation figures and conservative Liberals Andrew Hastie and Jacinta Nampijinpa Price, who have campaigned against so-called "mass migration".
"We cannot be complacent in the face of failure and rightward drift of the clown show that is the coalition, leaving a vacuum for the re-emergence of Pauline Hanson's One Nation grievance machine," he said.
"With actual, real-life Nazis on the streets in 2025, the sort of division being fomented by Hanson and (Barnaby) Joyce, Hastie and Price and their supporting cabals is not just damaging, it's playing with fire in a nation as diverse as ours."
A string of recent opinion polls have revealed a spike in backing for One Nation, passing the coalition for primary support and edging towards Labor.
"Good people are peddled lies on social media, and fear and anger in right-wing media," Mr Hill said.
"They deserve to be listened to, rather than dismissed."
Mr Hill accepted there were different views about Australia Day, but he urged progressives to embrace it.
"Many of us like to don Aussie garb and people don't want to be sneered at for loving Australia," he said.
"Why on earth would we cede our flag, our national day and institutions as propaganda for extremists and the hard right?"
His speech comes as a heavily armed rapid response unit is made a permanent fixture of policing in one state after its creation to combat hate-driven violence.
About 250 NSW Police officers will transform Operation Shelter, established in 2023 to crack down on anti-Semitism and Islamophobia, into a lasting and dedicated hate-crime unit.
The Australian-first unit means officers with long-range firearms will patrol high-profile public buildings, places of worship and protests around Sydney with a 24-hour operations centre to back them up.
The centre will support the unit with real-time co-ordination and surge management, including training, logistics and intelligence to sharpen targeting and prevention.
They will also be equipped with a fleet of modified rapid-response vehicles.
The decision comes two months after the Bondi terror attack, during which 15 innocent people were killed by gunmen targeting Hanukkah celebrations.
NSW Premier Chris Minns said installing a permanent structure for Operation Shelter, instead of rotating officers from various commands, was necessary so police were always ready.
"People want to see police where it matters, at major events, near places of worship and in busy public spaces," he said on Wednesday.
"This ensures that presence is consistent, because our security challenges have changed and our policing model needs to change with them."
The premier has taken aim at weekly pro-Palestine protests, saying they stretched police resources and disrupted community harmony.
He ratcheted up his comments after the Bondi massacre saying "words lead to actions".
