The incident in Perth came in the same week as the Australian Security Intelligence Organisation highlighted the growing terrorism threat of far-right extremism in Australia.

Under Tasmanian law, it is not illegal to publicly display Nazi images, however it could fall foul of the state's Anti-Discrimination Act if a complaint was made.

Tasmanian Liberal senator Claire Chandler said she would be supportive of moves to clearly ban Nazi symbols from being publicly displayed.

"I would support any legislative approach by state governments to ban the Nazi flag and similar Nazi displays," she said.

"The atrocities committed by the Nazis should be known to everyone and it is appalling that anyone would wish to associate themselves with Nazi beliefs or symbols."

Senator Chandler this week addressed terrorism risks during a speech in the Senate, arguing against the release of eight convicted terrorists who are due for release shortly.

Mr Mitchell said if it was within their power, Housing Tasmania should take more decisive action regarding the incident in Perth.

"There's no excuse for it. There is no excuse for flying a symbol of hatred and division in a democratic, peace-loving country like Australia," he said.

MORE ON NAZI AND ANTI-SEMITIC INCIDENTS IN TASMANIA:

A Tasmanian Jewish leader also called on the Tasmanian Government to "address" the issue of Nazi symbols being publicly displayed. The Perth incident was the latest of several anti-Semitic incidents in Tasmania in recent years.

Mr Mitchell said introducing laws to ban Nazi symbols could also have "unintended consequences".

"We wouldn't want a law that ultimately would restrict free speech. Anything that happens would have to be carefully considered," he said.

"In a democratic, tolerant society where we value free speech, these extremist anti-democratic movements use democracy's tolerance as a tool against itself - they almost devour it from within.

"We need to be stronger and have more resolve that democracy can't tolerate these guys anymore.

"Combating it takes a lot - it requires education, political will from governments.

"I never thought in my lifetime, post-World War II and the horrors of the Holocause and the hundreds of millions who died, we would see the rise of anti-Semitism and the far-right to the extent where they are becoming part of the political mainstream."

Despite his growing concerns internationally, Mr Mitchell said there was limited evidence to suggest any growing far-right movement in Tasmania.