The so-called Islamic State (IS) group is weak and Australia has no plans to send combat troops to fight it, Prime Minister Malcolm Turnbull says.
Mr Turnbull was speaking after terror attacks in Paris claimed by IS.
His remarks contrasted with former prime minister Tony Abbott's description of IS as a "death cult".
Mr Abbott, now serving as a backbench MP, called for Australia to commit combat troops to the Middle East after the Paris attacks.
Australia is part of a US-led coalition bombing the group in Iraq and Syria.
IS hype
Mr Turnbull told Australia's House of Representatives that IS relied on its propaganda network and "we must not be fooled by its hype"
But the group must be defeated militarily in Iraq and Syria, where it has overrun vast swathes of territory, he said.
"Its ideology is archaic, but its use of the internet is very modern. ISIL has many more smartphones than guns, more Twitter accounts than fighters.
"It does not command broad-based legitimacy even in those areas under its direct control. It is encircled by hostile forces. It is under military pressure."
Mr Turnbull made the comments as part of national security statement to Australia's parliament.
Analysis: Shaun Davies, Australia Editor, BBC News website
Tony Abbott never backed away from his description of the so-called Islamic State (IS) as a "death cult".
When terrorism experts said IS would be delighted that his colourful description promoted the group's propaganda aims, Mr Abbott was dismissive.
"I think we should call things what they are," he said in June this year.
Fast-forward five months and Australia's political landscape is very different. Prime Minister Malcolm Turnbull, who deposed Mr Abbott in September, wants to undercut IS's effective propaganda.
Rather than boots on the ground, Mr Turnbull is focusing on a war of ideas.
Counter-productive
Mr Turnbull said the government of Iraq believed the presence of large numbers of Western troops in that country would be "counter-productive".
He also said the consensus of world leaders was that there was no appetite for a large-scale invasion of Syria.
The deployment of Australian combat troops to either Iraq or Syria would be neither "feasible" nor "practical", Mr Turnbull said.
Former defence minister Kevin Andrews and Liberal MP Michael Sukkar had backed Mr Abbott's call for "boots on the ground" following the Paris attacks.
Currently there are around 90 Australian special forces soldiers advising counter-terror agencies in Iraq, as well as around 300 soldiers training members of the Iraqi national army
Australia also has six aircraft bombing IS positions in both Iraq and Syria as part of the US-led coalition.
Large commitment
Mr Turnbull said Australia's commitment to the Middle East conflict was already large given the country's size and geographic location.
"Larger for example than any European nation, larger than Canada or any of the neighbouring Arab states," he said.
Mr Turnbull also announced the adoption of a five-tiered National Terrorism Threat Advisory System that replaces the previous four-tiered system.
"The new system will provide the public with more information on the nature of the threat we are facing," he said.
"The adoption of a five-tiered threat system will also provide ASIO with greater flexibility in determining threat levels, reflecting the need to adapt to an evolving security environment."
Before Mr Turnbull became prime minister he made a speech saying the country should not overplay the threat of IS.
Mr Turnbull ousted Mr Abbott as prime minister following a party vote in September and is the fourth person to hold that office since 2013.
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