The threat of maritime terrorism has led to fundamental changes in the international maritime security environment. There have been major developments in the regulation of international shipping, particularly through the introduction of the International Ship and Port Facility Security code. The Australian Government moved quickly to implement the code in Australia through the Maritime Transport Security Act 2003 (MTSA), and to introduce a range of other maritime security measures, including additional facilities for screening containers and tighter immigration controls at seaports. The new measures have imposed large additional costs on the transport system and involved significant effort from both government and industry. A terrorist attack on Australia’s maritime interests is a credible scenario. We have high dependence on shipping and seaborne trade, and are adjacent to a region where terrorist groups have maritime capabilities. Australia still faces major institutional and operational challenges in reducing the risks of maritime terrorism. We haven’t met these challenges fully, and we lack consistency in the response across the states and territories. This report identifies where gaps exist in current arrangements. It includes recommendations to improve coordination between national and state agencies and to develop the national capacity to manage maritime security in the longer term. Other problem areas include the management of high-consequence dangerous goods, the management of the supply chain, and possible risks associated with the employment of large numbers of foreign seafarers on the Australian coast. Although the Federal Government has dramatically increased spending on counterterrorism measures, so far few, if any, additional resources have been provided for the prevention and response elements of maritime security in ports or close to shore. Several recommendations are made to redress this situation, including the establishment of a Maritime and Port Security Program, the strengthening of state water police, the establishment of state port police, and a specific role for the Australian Defence Force in ship and port security.