Two rival extremist groups were in a race to mount the first terrorist atrocity on Australian soil, a court heard today.

More than 450 armed police carried out morning raids on 23 properties across the country's two largest cities today, arresting eight men in Sydney and nine in Melbourne. Chemicals, weapons, computers and rucksacks were siezed.

One suspect was under police guard in intensive care after being shot in the neck after allegedly opening fire on police in Sydney. A handgun was said to have been found in his backpack.

Abdul Nacer Benbrika, a Muslim cleric also known as Abu Bakr who once praised Osama Bin Laden as a "great man", was among the nine men held in custody after brief court appearances in Melbourne.

It was suggested that the two loosely-affiliated groups had been in competition to carry out a major attack. Police said that although the target had not been specified, preparations were in their final stages.

The arrests came days after the government passed an urgent amendment to anti-terrorism laws making it easier for police to prosecute suspects involved in the early stages of plotting.

Ken Moroney, New South Wales Police Commissioner, told ABC Radio: "I’m satisfied that we have disrupted what I would regard as the final stages of a large-scale terrorist attack ... here in Australia." He said the he expected more arrests "in coming days and weeks".

Carl Scully, New South Wales Police Minister, said: "I was satisfied that this state was under an imminent threat of potentially a catastrophic terrorist act ... involving the attempted stockpiling of chemicals and related materials that could be used in a major explosion."

Details of the charges were given when the nine men arrested in Melbourne were brought before the city's magistrates court.

Richard Maidment QC, prosecuting, said that the men had been selling stolen cars to raise money for firearms and chemicals, and had built up a "sinking fund" for legal expenses.

"There's been talk within the Melbourne group that the Sydney group are further ahead than them and they wanted to do something about that," Mr Maidment said.

He said that the Sydney group had received military training and had stockpiled chemicals similar to those used in the July 7 bombings on London; the Melbourne group had ordered chemical handling equipment.

The nine Melbourne suspects were charged with belonging to a terrorist organisation between July 2004 and November 2005.

Mr Benbrika, a leading Algerian-Australian cleric, was said to be the spiritual leader of the group. He was further charged with directing the activities of a terrorist organisation.

Seven of the suspects were ordered to be detained until a court appearance on January 31. Two others made bail applications which will be decided tomorrow.

Fewer details were given when the seven suspects were brought before the Central Local Court in Sydney. None of the accused appeared in the public courtroom and none applied for bail.

They are accused of conspiring to manufacture explosives in preparation for a terrorist act, according to one of the defendant's charge sheets.

Adam Houda, defending one of the men, told reporters outside the court that there was no evidence that his clients were planning terrorism. He said they were victims of "scandalous political prosecutions". All seven were remanded in custody until Friday. The eighth man was said to be in a critical condition in hospital.

Australia has never been the target of a major terrorist attack, although scores of its citizens were killed in the two bomb blasts in Bali.

John Howard, Australia's Prime Minister, last week passed an amendment to harden police powers after receiving specific intelligence about a terrorist threat. Melbourne police said the new powers had helped them carry out their raids.

Opponents have said that Mr Howard’s support for the invasions of Iraq and Afghanistan had made Australia an inevitable target.

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