The minister responsible for multicultural affairs has contradicted national security agencies and denied a rise of right-wing extremism in Australia.
The heads of ASIO and the Australian Federal Police have both reported a significant increase of the far right.
Right-wing extremism now occupies 30 to 40 per cent of ASIO's counter-terror caseload, up from 10 to 15 per cent five years ago.
The AFP has also experienced a rise in investigations of far-right groups and spoken publicly of more young people being aggressively radicalised online.
Islamic-inspired terrorism continues to be the biggest threat.
Multicultural Affairs Minister Alex Hawke was on Thursday interviewed about new research revealing high levels of discrimination against Asian Australians and negative attitudes towards Muslims.
Asked whether the figures showed right-wing extremism was breeding in small pockets of the community, Mr Hawke said the Scanlon report instead showed most Australians welcomed people of all backgrounds.
"People are very cohesive here, they reject extremism, they embrace multiculturalism and immigration," he told Sky News on Thursday.
"Extreme groups are really fringe groups."
Mr Hawke said security agencies were well equipped to deal with extremists of all political persuasions.
He criticised Labor senator Kristina Keneally for her public comments about the far right.
"The government rejects Senator Keneally's thesis that there is rising extremism in Australia," Mr Hawke said.
"There is extreme elements, fringe elements in Australia that need tackling, they are being tackled. What we have here is increased social cohesion, not increasing extremism."
Labor introduced a Senate motion on Thursday to condemn the far right, but the government teamed up with crossbench senators to dramatically rewrite the text.
Reference to a significant increase in far-right extremism was removed and replaced with the statement: "Australia is one of the most successful multicultural countries in the world."
Other references to far-right extremism were changed to include the words "and far left", while criticism of government backbenchers Craig Kelly and George Christensen were struck out.
Labor and the Greens opposed the heavily amended motion, but it passed with support from the government and all non-Greens members of the Senate cross bench.
Home Affairs Minister Peter Dutton ordered an inquiry into extremist movements and radicalism in Australia late year, after Senator Keneally demanded a review of Australia's terror laws in relation to the far right.
Australian Associated Press