Anthony Albanese has commended the "courage and compassion" shown in Australia after the Bondi Beach attack in his New Year's message.

The Australian prime minister started his address on a sombre note, saying: "Right now, the joy that we usually feel at the start of a new year is tempered by the sadness of the old.

"Following the terror inflicted on Jewish Australians at Bondi Beach, our hearts ache for every life lost and every life changed forever."

Fifteen people were killed and dozens more were injured when gunmen opened fire towards an event attended by more than 1,000 people celebrating the Jewish festival Hanukkah on Sydney's Bondi Beach on 14 December.

Bondi Beach hero: 'I risked my life for innocent people'

Police believe the attack was inspired by the terror group Islamic State.

But Mr Albanese said the response to the attack showed "the best of the Australian spirit in all its courage and compassion".

"That is why I'm optimistic and determined that in the new year we will rise to meet the challenges ahead of us," he said.

Image: Police officers patrol the Sydney Opera House concourse as crowds gather ahead of the fireworks display. Pic: Reuters

Crowds have started to gather at the Sydney Opera House, where a major fireworks display is set to illuminate the sky to welcome in the new year.

The fireworks display is set to feature a tribute to the victims of the Bondi Beach terror attack.

Heightened security

Security in the city has been heightened, with security checks set up at popular viewpoints.

Chris Minns, the premier of New South Wales (NSW), where Bondi Beach is located, said police will be deployed "in massive numbers".

Image: A sign reading 'Please prepare for security screening' is displayed near a checkpoint at the Opera House. Pic: Reuters

He added that some will be carrying weapons that residents have not seen before, in what is being reported as an unprecedented display of firepower by officers, according to Sky News Australia.

Mr Minns also urged locals to by attending 31 December fireworks and other events with friends and family.