A 20-year-old Australian citizen has been arrested for plotting a shooting rampage in Melbourne's central square while it is packed with New Year's Eve revelers.

Police say he was inspired by jihadist terrorists and associated with a local "extremist community."

The man was rounded up during a special operation by police conducted at around 3 pm Monday local time [4 am GMT] in Werribee, some 32 kilometers southwest of Melbourne, where he lived with his Somali parents, police reported.

The suspect, who was born and raised in Australia, was handed over by police to a joint counter-terrorism team for interrogation.

"He was engaged in acting preparation for a terrorist offense and also collecting materials, documents to facilitate a terrorist act,” Victoria Police deputy commissioner Shane Patton told the media, speaking on the essence of the charges.

"What we will be alleging is that he was intending to use a firearm to shoot and kill as many people as he could in a Federation Square area on New Year’s Eve,” Patton said.

To this end, the man allegedly attempted to illegally obtain an automatic firearm and planned to follow Al-Qaeda manuals on how to commit a terrorist attack, The Age reports, citing Patton.

As he was about to buy a handgun, the man was swooped on by police.

The carnage was supposed to unravel at the Federation Square in downtown Melbourne, which is usually flooded with tens of thousands of people on December 31, celebrating the arrival of a new year.

The suspect reportedly drew inspiration from terrorist attacks carried out by other Islamist fanatics all over the globe, with police saying that the man "would become particularly energized” when such attacks were mounted.

Describing the possible consequences of the foiled plot as "catastrophic,” Patton noted that the man does not appear to have any accomplices and police do not believe there is an acute threat to the community.

Patton revealed that police had been watching the man "for a very lengthy period of time” before the raid, for about a year. Police also searched his family’s home in Werribee, while about a dozen police officers raided a computer store where the man was working for a couple hours a day to gain a working experience.

The owner of the store described the youngster as a "very quiet boy” whose father he met at a local mosque.

The family, meanwhile, seems to be in disbelief about the charges levelled at the 20-year-old, with his father saying on Tuesday that he believes his son has done nothing wrong.

"He's very innocent," he insisted.

It’s not clear how the man was indoctrinated, with police not linking him to any particular mosque. While assuring the public that "there was never any point in which there was a significant risk” emanating from the aspiring terrorist, Patton admitted that there is a net of extremists anchored in the province.

"He is associated with other persons in the Victorian extremists community ... it is a very small community of extremists,” he said.

Since the country’s terrorism threat level was upped in 2014, the police launched some 347 counter-terrorism probes, charging a total of 74 people with terrorism-related offences.

In the run-up to Christmas celebrations last year, Australian police reported that it had foiled a "very substantial terrorist plot” in Melbourne, with Federation Square was also being named as one of the prime targets. The perpetrators reportedly wanted to use explosives and other weapons on the city’s most important landmarks, including St Paul’s Cathedral and Federation Square.

As recent as in September, the country’s top counter-terrorism chief, assistant commissioner for counter-terrorism in New South Wales Mark Murdoch, now retired, said that despite all the efforts by the law enforcement and intelligence a major terrorist attack is "inevitable” on Australian soil.