Thousands of Jewish Australians have gathered in mourning and anger at Bondi metres from where 15 people were gunned down, with many targeting their ire at Anthony Albanese.
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The prime minister, who was booed by sections of the crowd as he arrived at the event, sat in the front row wearing a kippah, the traditional Jewish cap.
The memorial was watched over by a heavy police presence, including snipers on rooftops and police boats in the waters.
Mr Albanese has been blamed by many for perceived inaction on anti-Semitism following a string of attacks on synagogues, schools and businesses leading up to the bloody events at Bondi a week ago.
In stark contrast, NSW Premier Chris Minns - a steadfast supporter of Israel and Jewish Australians - was received warmly as he said the government had fallen short as a custodian.
"My heart is heavy for the lives that were taken here ... I want to say this clearly - we are sorry," he said to a standing ovation.
"The government's highest duty is to protect its citizens and we did not do that one week ago," Mr Minns said.
He announced the launch of an education campaign, One Mitzvah for Bondi, aimed at fostering community spirit through acts of kindness in honour of the victims.
The loudest cheer was reserved for Ahmed Al Ahmed, a bystander who stripped gunman Sajid Akram, 50, of his long rifle, preventing more people from being killed. Mr Al Ahmed is recovering from his injuries in hospital.
NSW Jewish Board of Deputies head David Ossip reiterated the need for a federal royal commission to piece together what had led to the attack.
"Up until two years ago, Australia was always the lucky country for Jews, but sadly no more - we've lost our innocence," he told the crowd.
"Last week took our innocence and like the grass here at Bondi was stained with blood, so too has our nation been stained."
He emphasised the "soul of the nation" was at a crossroads and that mending a fractured multicultural society hinged on active political will.
"Countries don't just happen or prosper by default," Mr Ossip said.
"They come together and flourish or fall as a result of deliberate choices of people stepping up and actively choosing what we want our society to look like, the choices of people like Ahmed Al Ahmed."
In a pointed address, newly installed NSW Opposition Leader Kellie Sloane said the scourge of anti-Semitism could not be ignored.
The MP, whose electorate of Vaucluse is home to a large Jewish community, detailed her efforts bandaging victims of the Bondi attack as gunshots were being fired.
Those killed included 10-year-old Matilda, elderly Holocaust survivors Alexander Kleytman and Marika Pogany, and rabbis Yaakov Levitan and Eli Schlanger.
"Let there be no doubt now anti-Semitism has now led to the spilling of blood on our nation's most iconic beach," Ms Sloane said.
She described the beach as "a symbol of freedom, of hope, and of the Australian spirit of our inclusion, of our beautiful diversity".
A minute's silence was held at 6.47pm, marking the time of the attack, and a single candle was lit in honour of Hanukkah as well as the fallen victims.
A prayer for the wounded was read in Hebrew by a rabbi as he listed those injured from the community.
"Our answer to the terrorists is ... we will not be silenced, we will not hide, we will not leave in fear," Executive Council of Australian Jewry president Daniel Aghion said.
Police said they found homemade IS flags in a vehicle belonging to one of the gunmen who opened fire on the crowd of Jewish faithful.
Thirteen people injured in the attack remain in hospitals as the NSW government prepares to introduce tough legislation tightening gun ownership and hate speech.
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Australian Associated Press
