Ahmed Fahour, Australia's most prominent Muslim business leader, told a Melbourne audience on Thursday the past 18 months had been "really hard to endure" after the emergence of Daesh in Syria and Iraq.

He said the terrorists were neither "Islamic nor a state", but the "twisted ideology" spread by social media had torn apart good families – "both, here, in Australia, and in nations right across the globe".

He also warned far-right "pockets of fascist intolerance" had also exploited the internet as a way to connect and promote a misguided idea Islam and the West are somehow incompatible.

Mr Fahour pointed to debates over banning headscarves, protests at the site of proposed mosques, and opposition to the Halal certification of food.

"How do these issues become mainstream in a harmonious, peaceful, secular nation like ours? I suspect it's due to a combination of timidity and complacency. The extremists are louder, more prolific and more organised than the voices of reason."

But Mr Fahour said being in a job was the best way of preventing people feeling alienated, and revealed he had recently urged a conference of top business leaders to think about social cohesion when hiring staff.

"I said to the CEOs sitting around the room, think long and hard, that when the next CV comes in front of you that has the name "Mohammed" or "Abdul" or something like that, and you knocked it back, what role have you played in these people's social exclusion."

Mr Fahour, delivering the Sir Zelman Cowen Oration for the Australian Institute of International Affairs, said a job offered people in their late teens and early adulthood the best means of social inclusion.

"That is true for young people across all of our minority communities, whether they be gay, African refugees, or Muslim Australians."

But Mr Fahour warned Daesh should not be underestimated.

"They have grown from a small local group of hard-core jihadists – and disseminated their barbaric ideology to a global audience," he said.

"In the process, they have tapped into a sense of alienation – or exclusion – that exists in isolated pockets of every society."

"They use social media skilfully, to connect these disaffected voices to one another. In the process, they give these alienated individuals a sense of belonging. And that desire to belong to something – anything – makes these individuals blind to the utter senselessness of their unifying cause."

But Mr Fahour praised the social media response following the Sydney siege last year, where thousands pledged tolerance around the Twitter hashtag, "I'll ride with you".

"It went viral on Twitter here in Australia and across social media platforms globally. It was a rare example of the forces of harmony and pluralism deploying social media to counter the voices of intolerance," Mr Fahour said.

"In an instant, it restored a sense of belonging amongst Australian Muslims. It reinforced my sense of citizenship. It filled me with an overwhelming sense of pride in our nation."