Australia's major intelligence agencies - led by the Australian Security and Intelligence Organisation - are getting big budget increases as counter-terrorism is entrenched as the top national security concern.
The federal Government, already spending about $800 million a year on counter-terrorism, is poised to lift that figure even higher to cover the new measures announced by John Howard this week.
State government spending on counter-terrorism is running at about $300 million a year, according to the latest estimates.
The total government spending is equivalent to the annual money set aside for research and development in the Backing Australia's Ability innovation package.
ASIO, now the subject of a major review by former Australian Secret Intelligence Service head Allan Taylor, had 620 staff at the time of the September 11 terrorist attacks in the US in 2001.
It now has about 1000 staff and is expected to win government approval to lift its staff ceiling by another 500.
The Weekend Australian understands that ministers are considering approval for another 300 agents and support staff for the domestic spy agency on top of the 200 extra already flagged.
ASIO's budget of about $200million a year has more than doubled since September 11, as have the budgets of ASIS and the Australian Federal Police.
ASIS, the nation's overseas intelligence agency, is expanding rapidly, lifting staff numbers above 500 with a more intensive counter-terrorism focus on Southeast Asia. Government sources say its annual budget, officially stated as $100 million, is running at about $130 million.
Senior government sources say the Taylor review, originally commissioned by the Department of Finance as a budget review, will recommend that ASIO be given extra funds for office accommodation in Sydney and Melbourne.
ASIO will also lift its investment in intelligence collection, analysis and technical capabilities used for covert surveillance.
The anticipated expansion comes as ASIO strives to monitor an estimated 70 to 80 Muslim extremists living in Australia.
The Defence Signals Directorate -- Australia's biggest intelligence agency with 1000 staff and an undeclared annual budget of close to $400 million -- is investing heavily in new computer technology to help Australia's counter-terrorism effort.
The defence force is spending more than $100 million a year on dedicated counter-terrorism manpower and equipment, including newly equipped special forces.
This is in addition to the estimated $500 million a year it spends on its three defence intelligence agencies: the Defence Signals Directorate, the Defence Intelligence Organisation, and the Defence Imagery and Geospatial Organisation.
"The money is just pouring in," one senior Defence source said this week as Mr Howard announced a raft of new powers for ASIO and the AFP as part of the response to the July 7 bombings in London.
This year, including the cost of the troop deployments in Iraq and Afghanistan, federal government counter-terrorism spending will total more than $1.1 billion.
Australian Strategic Policy Institute budget expert Mark Thomson estimates Howard government spending on terrorism since the September 11 attacks in 2001 will hit $7.9 billion by 2010 if the costs of the Afghanistan ($514 million) and Iraq ($1.26 billion) deployments are included.
"Add this to the cost of aid to Iraq ($263 million) and Afghanistan $246million) and you get a total of $8.5 billion for the decade," Dr Thomson said.
However, the huge investment surge comes as the nation's intelligence agencies provide the Government with sober assessments of progress in the fight against Islam's global jihadists - a struggle in which the war in Iraq has become inextricably entwined.
In the past six months, agency assessments about the prospects for a successful democratic transition in Iraq have become increasingly pessimistic.