Victoria state Police Chief Commissioner Graham Ashton told reporters on Friday the seven had been inspired by the Islamic State group and had planned attacks on Melbourne's Flinders Street train station, neighbouring Federation Square and St Paul's Cathedral.
Mr Ashton said police had been watching the alleged plotters for some time, and believed they were preparing to use explosives and other weapons.
Police said they believed the threat had been neutralised through the raids on Thursday night and Friday morning.
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