The Aussie actress, who is best known for her roles in Prisoner and Underbelly, gave the National Film and Sound Archive's Longford Lyell lecture in Melbourne on Monday evening (November 28), where she said that the public want to keep watching Aussie-made TV shows and films.
According to AAP, Thornton said: "We are a small industry. By virtue of our population, we cannot expect to survive as an industry without government assistance and support.
"The cultural argument that we need to tell our stories using Australian voices has been the historical basis for government investment in our industry. It also seems to speak to a widespread public hunger.''
Thornton said that a refundable tax offset for Aussie producers had been a positive step and should be kept.
"Industry and government need to be vigilant and exercise care in defining the elements that are to constitute an Australian film for the offset rebate,'' she explained.
She also suggested ramping up production and making lower budget film and TV, therefore giving Australians the opportunity to tell more stories and the chance to "develop our skills as a filmmaking community".
She also insisted that overseas content and actors should not be used, saying: "Australian taxpayers are prepared to underwrite the production of Australian stories in order to see their characters reflected on their screens.
"It would be all too easy to be distracted and flattered while a larger and stronger culture increasingly weakens a smaller and less robust one."
Fellow Australian actor Geoffrey Rush was recently named 'Victorian of the Year' in recognition of his dedication to the Aussie acting industry.