The nine suspects were arrested in November 2005

"They believed Islam was under attack," prosecutor Wendy Abrahams told the court. "Violence was the primary tool of their jihad."

The court hearing is set to determine whether there is enough evidence for the men to stand trial before a jury.

The nine suspects were arrested in a series of pre-dawn raids in late 2005.

A court in Melbourne has already sent 11 people arrested at the same time for trial on similar charges.

'Maximum damage'

The nine accused men were seated behind armoured glass in a specially re-fitted room of Penrith Local Court, guarded by armed police.

Ms Abraham opened the proceedings by outlining the prosecution's case, in a hearing which is expected to take several weeks.

Ms Abrahams said the suspects had decided to launch an attack, and had already started buying the ingredients and downloading instructions for constructing bombs from the internet.

When authorities searched the house of one suspect, they found a computer memory stick containing a document in Arabic that included instructions on bomb manufacture, and how to hide explosives near key buildings, Ms Abrahams added.

"In a nutshell... the defendants entered into an agreement... to carry out a terrorist attack," Ms Abrahams told the court.

Police have accused the nine defendants of trying to inflict maximum damage in Australia, as part of a holy war.

Among the alleged targets was Australia's only nuclear research reactor, on the outskirts of the country's biggest city, Sydney.

The hearing will give defence lawyers an opportunity to challenge these allegations.

Because this hearing is just meant to determine whether there is enough evidence for the men to stand trial, none of the suspects, who each face a maximum penalty of life in prison, have entered a plea.

The men were detained after the Australian government passed new anti-terrorism legislation, which made it easier for the police to prosecute suspects allegedly involved in the early stages of planning an attack.

Prime Minister John Howard pushed the legislation through parliament after voicing concern that Australia could face attacks similar to the deadly London transport bombings in July 2005.