Commissioner Virginia Bell on Wednesday asked youth worker Hayden McCullough about previously heard testimonies regarding anti-Semitism and radicalism in school grounds.
"We have seen … a great deal of evidence about really young kids … saying things like Hitler should have finished the job," she noted.
Mr McCullough said he had a conversation with a young boy "teetering" on that line of extremism a few days ago.
He said, while unlikely destined for radicalisation, the boy offered a glimpse of a "general lack of understanding around the severity of what went on".
"Critical thinking, and probably a bit of lack of empathy around certain situations towards certain groups of people is lacking amongst young people nowadays," he said.
A youth worker with Top Blokes foundation, Mr McCullough appeared with other members of the Youth Advisory Council for a Safer Australia at the Royal Commission into Antisemitism and Social Cohesion.
He suggested Australian students may lack in understanding what constituted extreme attitudes.
"We like to use the rhetorical question: are those jokes starting to not feel like jokes anymore?" he said.
"Unfortunately probably not enough young people can identify if those jokes are still jokes."
Fellow council member Salim Sarkis recommended authorities approach at-risk children for "conversation, rather than confrontation".
Communication strategies for counter-extremism programs should be targeted to meet children where they are with respect, a blend of humour, and colour, the council said.
Initiatives must also mitigate a distrust of law enforcement and concerns regarding reporting confidentiality, they added.
Earlier, NSW's Communities and Justice Department director Heather Jackson gave evidence on her state's anti-extremist violence program.
She said people in a democracy were entitled to hold extreme ideologies, but programs had to address the chance of violence.
"People in a democratic country can hold a belief. The second act — the violence — is the particular issue," Ms Jackson said.
She said a participant could successfully complete the program while still holding extreme white supremacy views, so long as they no longer posed a risk of violence.
The participants' beliefs were not ignored and could still be challenged through mentoring and other elements of their case plans.
National counter-terrorism co-ordinator Brendan Dowling told the inquiry about several counter-extremism programs, including The National Support and Intervention Program, Step Together, the Diversions Australia pilot, and two now-defunct initiatives.
Mr Dowling pointed to disengagement as a key objective for those pathways.
"We don't set ourselves an aspiration to change the way somebody thinks, or to measure the success of our programs by changing … what someone's beliefs are," he said.