It was a plan ruthlessly calculated to cause maximum grief and dismay.

At this time of year, people gather in large numbers in public areas. Their guard is down, and their mood heightened by the joy of the season, time spent with family, sharing of food and the generosity of gift giving.

Islamic State would see a successful attack on these targets at this time of year as the most morale-sapping event possible for our society.

As Deakin University terror expert Greg Barton points out, the season also lasts virtually a month, from when the Christmas decorations go up, to when the New Year's hangover is dealt with. Operationally, this gives attackers ample time to find a way to inflict maximum damage.

Already this Christmas we've seen the devastating Berlin market attack, also outside a church, which killed at least 12 people who were simply going about their festive business.

Another proposed attack on the Champs Elysees Christmas market was  recently foiled in France, and three wannabe Christmas bombers were killed by anti-terror police in the suburbs of Jakarta.

These events show again, if more evidence was required, that the so-called Islamic State is prepared to defile any celebration. That they are prepared to use any tool, in this case, allegedly a group of young, mostly Australian-born Muslim men, to hurt its enemies.

It also shows that it is still willing and able to project its malignant power outwards, even though the group is in retreat in its home territories, with the sustained attempt underway by Iraqi troops to retake the stronghold of Mosul.

Islamic State has been relatively quiet since Bastille Day in July, but these attacks reveal the threat is well and truly still live.

The latest arrests make the IS call-out of earlier this year, which named specific targets, including the MCG, the Sydney Opera House and Bondi Beach, as well as the Melbourne suburban streets of Brunswick and Broadmeadows, seem suddenly much more real. 

That threat was made in a new IS magazine, Rumiyah. In the group's weird theology, the end of the world will come with an attack on Islam by "Rome" in a place called Dabiq. Well, Islamic State lost control of Dabiq in September, so it changed tack, and is now prophesying the crumbling of the west.

"This idea of the west, of Rumiyah, is linked to the idea of Rome, the centre of Christendom," says Professor Barton.

"They see Christianity as the defining feature of the west, and Christmas and Easter are the biggest days on the calendar, so that's what jihadis are always looking at. They are very conscious of brand management, so they'll be very conscious of being seen to be potent."

But it's also worth remembering, as our fury builds, that Islamic State is ecumenical when it comes to inflicting suffering on people who are innocently celebrating religious holidays.

If Christmas is the holiest time of the western calendar, the month-long period of Ramadan and its closing celebration Eid al-Fitr, holds a similar place in the hearts of Muslims, and this year's Ramadan was also a bloody affair, with Muslims often the victims.

Over two weeks in June, IS carried out lethal terrorist attacks in Bangladesh, Iraq, Jordan, Yemen, Saudi Arabia and at the Istanbul airport, where 45 people were killed.

In other words, they are ruthless with anyone they believe is not a true believer, whether Muslim or Christian. In fact, the vast bulk of their victims have been people whom they consider takfir – Muslims they declare are no longer Muslims because of their "un-Islamic" actions.

This may not make us feel better at the attempted desecration of Christmas. 

But it should help us direct our anger and dismay to where it should rightly lie. One specific, hateful group - Islamic State - and not towards Islam in general.

EARLIER: A Christmas Day terrorist plot targeting Melbourne landmarks has been foiled after police conducted raids across the city's north west.

Seven people have been arrested and five are in custody stopping what police chief commissioner Graham Ashton said was a potential multi-mode attack at Federation Square, Flinders Street Station and St Paul's Cathedral.

He said the attack, using "explosive devices" was "mostly likely" set to be carried out on Christmas Day. 

Apart from explosives, police also suspect guns and knives may have been used. Police said the suspects were "self-radicalised" but inspired by Islamic State.

Counter-terrorism police were questioning five people in custody and they are expected to face court later on Friday. Police anticipate laying charges in relation to "acts in preparation of a terrorist event."

Prime Minister Malcolm Turnbull said the planned attack was "one of the most substantial terrorist plots that have been disrupted in recent years".

In strong words condemning the plot, Mr Turnbull said: "What these criminals seek to do is kill us but they also seek to frighten us, to get us to abandon our Australian way of life.

"They want to divide Australians. We will not let them succeed.

"I want to thank the men and women of the police in Victoria, the Australian Federal Police and ASIO and other agencies for their work in thwarting this terrorist activity, which was an Islamist terrorist plot inspired  - as the Victorian police commissioner just observed a moment ago - by Daesh or ISIL," Mr Turnbull said in a press conference.

He outlined that 12 major plots had now been disrupted since September 2014, when the terror threat level was raised to "probable", and 57 people charged as a result of 25 counter-terrorism operations.

"This news will be of great concern to all Australians. We are approaching the Christmas season, a time when we come together in peace and love, with our families. We congregate in public places for Christmas, for New Year's Eve. It is a time of happiness and joy.

"These terrorists sought to disrupt it. They have been thwarted. They are in custody. They are no longer a threat to Australians' security."

Police said these men were Australian-born and in their 20s - except for one Egyptian-born man. Police said some had a Lebanese background. 

Chief Commissioner Ashton said police executed search warrants in Flemington, Meadow Heights, Dallas, Campbellfield and Gladstone Park overnight as part of Operation Kastleholm. The counter-terrorism operation also involved Australian Federal Police and ASIO. 

"These individuals have been persons of interest for some period of time," he said. "They're people we have been concerned about for a period of time."

He said intelligence led police to step-up their investigation in the past fortnight. Surveillance of the suspects conducting reconnaissance at Federation Square lead them to believe the area was the intended target. 

"If this had gone under guard, this would have been a significant attack," Mr Ashton said. 

Mr Ashton said the raids had neutralised any terrorist threat to the city on Christmas Day.

"Everything that we're getting at the moment indicates we have done that," he said. There was no suggestion of international assistance to suspected terrorists, police said. 

The raid found evidence an improvised explosive device was being constructed.

"The attack had the potential to cause significant community harm," Mr Ashton said.  "The community should be concerned but should be reassured that we have got on top of this particular issue. 

"The sort of threats that were presented really try to want us to cower before terrorism, but this is a clear example of where we don't cower before terrorism. We get on, we get out and enjoy Christmas, enjoy our new year." 

Police were conscious of a Berlin or Nice style attack with a heavy vehicle, but there was no evidence to suggest that was going to happen in Melbourne. 

Extra police will be at major events in coming weeks including the Boxing Day Test and Carols by Candlelight. 

Premier Daniel Andrews said the work of authorities had stopped a very serious matter and that there would be increased police presence at large gatherings.

"These threats are not notional they are very real right across our city and our state," Mr Andrews said.

"Victorians should go about their business; this is a very special time of the year."

In an environment in which "we cannot mitigate all risk," the Prime Minister also called on people to keep their eyes open and "speak up" if they see or hear anything suspicious, urging them to report it to the national security hotline.

Opposition Leader Bill Shorten said the arrests were concerning but echoed calls for Australians to enjoy the Christmas season as they normally would.

"The few extremists in our community who would wish to disrupt the Australian way of life, they win when we give up."

Richard Willingham, Fergus Hunter