"Australians who travel overseas to sexually exploit children will not escape punishment," Mr O'Connor said.
It also updates laws covering the use of the internet or a mobile phone for sexual exploitation, which have led to 500 arrests since being introduced in 2005.
Under the child sex tourism laws, new offences covering steps leading up to sexual activity will be covered.
Grooming or procuring a child for sexual activity overseas are new offences and will carry maximum jail terms of 12 and 15 years respectively.
A new aggravated offence, carrying a maximum jail term of 25 years, would cover online child porn networks where the perpetrator is in Australia.
Jail terms for using the internet to groom or procure a child will be raised from 10 to 15 years.
The same penalties will apply for possessing, producing or distributing child pornography.
Other new internet offences covering the transmission of indecent material to a child are being created.
The legislation also gives the AFP the power to permanently confiscate encrypted computer hardware used to store child pornography.
Assistant Commissioner Neil Gaughan, the national manager of the AFP's high-tech crime operations, said the legislation also would make it easier for the AFP to share information with overseas law enforcement agencies.
Most of the child pornography seized in Australia originated in Russia and North America, Mr Gaughan said.
Australian pedophiles were more likely to offend in South-East Asia, in countries such as Thailand, Cambodia and the Philippines, he added.
Child protection advocacy group Bravehearts welcomed the proposals to increase penalties for online pedophiles, but its founder and executive director Hetty Johnston said she would have preferred a 25-year jail term for people who groomed a child for sexual activity overseas.