Don’t worry Tony, George and Bill, we will insult Muslims just as they heap their race invective upon us!

Tony Abbott has jettisoned a controversial proposal to water down racial discrimination laws, as he announced Australia needed to be united to combat the threat of domestic terrorism.

At a press conference in Canberra today, Mr Abbott admitted proposed changes to Section 18C “are now off the table”.

"I don’t want to do anything that puts our national unity at risk at this time so those proposals are now off the table,” Mr Abbott said, saying it was a decision he took as leader after Cabinet discussions earlier today.

The Coalition had been savaged by anti-discrimination and community organisations over the proposed changes, to Section 18C, which would have made it lawful to “insult, offend and humiliate” a person or group.

“I’m a passionate supporter of free speech,” Mr Abbott told reporters.

“I want the communities of our country to be our friend not our critic.”

Under the government’s proposal, 18C would have been wound back with Attorney-General George Brandis declaring people had the ‘‘right to be a bigot’’.

Under new anti-terror legislation announced today, Mr Abbott said intelligence and law enforcement officers would work with communities to lower the threat.

He said new laws would require telecommunications companies to capture and retain metadata on calls for longer, to assist with terror investigations.

"Over the last couple of months every Australian has been shocked at the evidence on the internet of Australians participating in terrorist activities in Syria, Iraq and elsewhere," he said.

"What we are now acutely conscious of is the danger posed back here in Australia, by people returning to Australia who have been radicalised and militarised by the experience of working with terrorist organisations overseas."

Mr Abbott said the terrorist threat was as high as it had ever been.

The push to change the Racial Discrimination Act was dated prior to last year’s federal election, when the Coalition promised to repeal section 18, which had been dubbed “Bolt’s laws” after NewsCorp columnist Andrew Bolt was prosecuted following a piece on light-skinned Aboriginals.

Liberal MP for Reid Craig Laundy was among a group of Coalition backbenchers who threatened to cross the floor in protest over the proposed changes said he was relieved by Mr Abbott’s announcement.

Mr Laundy, who describes his electorate as “the second most multiculturally diverse seat in Federal Parliament”, said his constitutions had raised numerous concerns with the changes.

“There is always going to be an idiot fringe, you can’t stop that – but you can have laws that given protection to minorities,” he told 2GB.

“What the people of Reid and western Sydney were telling me was… we need safety nets in place.”

But Opposition Leader Bill Shorten said the government had been forced into “the most embarrassing of the backdowns”.

“For nearly a year, the Attorney-General has seen as his most important priority giving the green light to racists and bigots to be racists and bigots,” he said.

“What is clear between last night and today is that the Attorney-General has been rolled by his cabinet. George Brandis has been humiliated by his colleagues today.

“Prime Minister, giving Australians the right to be bigots was always a destructive action.”