Australia's most senior diplomat, Department of Foreign Affairs and Trade secretary Frances ­Adamson, last month urged universities to better protect themselves from the rising influence of the Chinese Communist Party, saying that "silencing of anyone in our society – from students to lecturers to politicians – is an affront to our values."

Espionage and covert foreign interference can "cause immense harm to our economic prosperity and the very integrity of Australian democracy," Senator Brandis told parliament.

"We're seeing public reports of the insidious effect being directed against other liberal democracies as well, whether it be interference in democratic elections, or the stifling of debate."

The government's response will cover three main legislative strands: the banning of political donations from foreigners; an updating of the criminal code to include revisions of espionage, sabotage, treason and secrecy offences, as well as a new category criminalising "certain acts of foreign interference", and; a transparency measure partly modelled on the US Foreign Agents Registration Act, which would act similar to a lobbyists' register.

"This government is committed to ensuring our political system is free from foreign interference and covert influence. We believe that only Australian individuals and organisations should be able to participate in Australian elections," Senator Brandis said.

Legislation on the banning of foreign donations will be introduced into parliament during the spring session, with Senator Brandis flagging plans to introduce the transparency scheme in the current sitting.

"That regime will require individuals or institutions to make a declaration if they're acting on behalf of a foreign power, to influence the political processes of Australia.

"For the first time, the public and decision-makers in government will have visibility of the level and extent to which foreign sources may be seeking to influence Australia's government and political processes."