Fear and punishment is not working on its own, said Steve Killelea, executive chairman of the global think-tank, the Institute for Economics and Peace, which compiles the annual Global Peace Index and Global Terrorism Index.

In the 2014 Global Terrorism Index, Australia was only ranked the 96th country most prone to terrorism but it was the sixth biggest supplier of western fighters in Syria.

Of the 90 Australians who have joined the conflicts in Syria and Iraq, more than 20 have returned home and the threat they pose is "the greatest risk that we have faced in many years," Attorney-General George Brandis said.

He said the government had boosted police powers including the ability to arrest or place control orders on those who return.

However, Mr Killelea said Australia would do better to engage with returned fighters and use them to discourage would-be jihadists from following in their footsteps.

"This idea of using fear and punishment only ends up alienating people," he told Fairfax Media.

In the UK, three former members of the extremist Islamic group Hizb ut-Tahrir, one of whom was jailed in Egypt, have established an anti-extremism think tank, Quilliam Foundation, that runs outreach programs and steers people away from extremism.

In Norway, foreign fighters are not charged on their return, however Mr Killelea said it had not stopped a strong flow of Norwegian fighters to Syria.

Senator Brandis would not commit to exploring the idea posed by Mr Killelea.

He said the government's forthcoming $13.4 million de-radicalisation package will include programs and support for at-risk youth but it was up to individuals and community groups to use those with first-hand experience of terrorist groups such as Islamic State to dissuade others.

Of the 20 jihadists living back in Australia, less than half have been charged.

Several others have been charged after being intercepted in border countries or airports, such as Kellyville teenager Ahmad Saiyer Naizmand, who pleaded guilty on Tuesday to using his brother's passport to fly to Malaysia and then Dubai in August, bound for Syria.

The 19-year-old had his family home raided by counter-terrorism officers a month after he returned.

Community leader Jamal Rifi said it was astonishing that the federal government had only gone down the path of punishment rather than engaging with the 20 jihadists that have returned to Australia.

"I have no doubt among these people there will be one or two at least who will be an excellent messenger to tell the people about the illusion of what is taking place on social media," he said.

"The failure of us as a community and society to use their experience is like someone putting a straight jacket on what we can do for these young people."

Ahmet Keskin, executive director of the Affinity Intercultural Foundation, said returned fighters would be in the best position to understand the psychology that Islamic State is capitalising on to lure vulnerable teenagers.

"Prevention is better than the final treatment hence the focus on education and giving them wisdom of what they could anticipate if they were to be caught up in that ISIS narrative," he said.

Mr Killelea said the 2014 Global Terrorism Index showed that terrorism has "gone through the roof" in the past year.

Terrorism deaths have increased five fold since 2000.