Prime Minister Anthony Albanese said the latest attack, the second targeting the Jewish community in the Sydney suburb in three weeks, was an "outrage" and he would be briefed on it soon by a new antisemitism task force.
"This is an attack on people because they happen to be Jewish," Albanese told ABC Radio.
"The idea that we take a conflict overseas and bring it here is something that is quite contrary to what Australia was built on ... this is a hate crime, it's as simple as that."
The New South Wales state police said two people wearing face coverings and dark clothing were spotted near the area when the car caught fire in the eastern suburb of Woollahra, an area with a large Jewish population.
New South Wales Premier Chris Minns said the incident would be treated as "a wanton act of vandalism", and offenders faced up to 10 years in jail.
"I don't think there is any point in sugar coating it or trying to downplay it. This isn't just a random act of destruction, this was specifically designed to incite hate," Minns said at a media briefing.
Australia has seen a rise in antisemitic and Islamophobic incidents since Israel retaliated against an attack by militant Palestinian group Hamas on October 7, 2023 with an assault on Gaza that has left tens of thousands of people dead.
More than 2000 anti-Jewish incidents were reported by volunteer community groups and Jewish organisations between October 1, 2023 and September 30, 2024, versus some 500 incidents in the same period a year ago, the Executive Council of Australian Jewry said in a report published this month.
The Australian Jewish Association said on Wednesday it had warned the government several times of possible violent attacks, which it chose to ignore.
"If the Albanese government cannot protect Australians, they must seriously consider stepping down and allow someone else to do so," the Australian Jewish Association said in a post on X.
Israeli Prime Minister Benjamin Netanyahu has also criticised the Australian government, saying the attack on the synagogue could not be separated from the "anti-Israel spirit" of some of its policies, including support of a recent UN motion backing a Palestinian state.
The Australian government has defended its record on curbing antisemitism.
