The unusual injection of resources, just two months after the federal budget slashed funding to other departments, comes as questions are being asked about how intelligence agencies were blindsided by last month's extraordinary breakout by Islamist militants from Syria into northern Iraq.

''We were surprised at how quickly Iraqi security forces were overrun by ISIS in the north,'' Foreign Minister Julie Bishop said, referring to the Islamic State of Iraq and Levant, also known as ISIL, which has declared itself a ''caliphate''.

She said intelligence agencies, particularly in the US, had been closely watching events in Syria but had been surprised at how they were able to roll over the Iraq border without obstruction.

Analysts say there is little immediate prospect of Iraqi forces pushing them back, even with US, Russian and, particularly, Iranian assistance.

''I believe this is one of the most significant domestic security threats that we've seen for some time,'' Ms Bishop said, describing what has now become ''an Arab winter'' in Egypt and Libya as well as Syria and Iraq.

Officials say significant resources have been diverted from Middle East and counterterrorism work to grapple with growing counter-intelligence demands associated with China.

The China-focused work will continue but more funding is required to bolster Middle East capabilities, which have been exposed.

Ms Bishop, who oversees the Australian Secret Intelligence Service, the overseas intelligence agency, said the spread of ISIL and general chaos across the Middle East has raised the risks of terrorism spreading to Australia.

She blamed the Gillard government for failing to devote adequate resources to the threat posed by Australians fighting in Syria, despite public warnings by the head of the Australian Security Intelligence Organisation, David Irvine.

''Let me be blunt: under the previous government we imposed budgetry constraints on our intelligence agencies including an efficiency dividend,'' Ms Bishop said in an interview.

''But you can't stop and start operations when they are building relationships and resource capabilities over a long period of time.

''Our intelligence agencies have been providing our government with an increasingly clear intelligence picture but there is only so much they can do with fewer resources.''

All Australian intelligence agencies have received massive funding increases since 2001, both in absolute terms and in relation to other departments.

Recently, Ms Bishop said resources have been shuffled back to plug gaps in Middle East capabilities but there was a need for certainty.

''There comes a point where the threat increases to the extent that reprioritising resources is not enough,'' she said.

''Therefore the government is considering what further support may be given to our intelligence communities so that they can continue to focus on the Middle East and on this evolving threat.''

The number of Australians training and fighting in Syria is estimated to be about 150, which is about five times the number of Australians who were training with al-Qaeda and the Taliban in Afghanistan.

The outsized representation may reflect Australian ethnic demographics, with large Lebanese communities engaged in events in Syria from a range of perspectives, compared with fewer people who originate from Pakistan or Afghanistan.

Vast resources are required in Australia and overseas to monitor young men who are or may be drawn to the Syria conflict, and who may one day return with new methods and ideologies of violence.

Next week the Abbott government expects to push through new legislation to provide security agencies with more powers to deal with the threats.

Ms Bishop said the chaos seen in Iraq, where the US led an invasion, and in Syria, where the US did not intervene, showed there were no easy solutions. ''Damned if you do and damned if you don't,'' she said.