The annual festival has evolved from a one-day event in 1996 to a three-day affair with more than 280,000 last year.

But the number of stallholders taking part was expected to be the lowest in the past three years, amid changes to alcohol permit policies and concerns some stallholders may not be able to sell cultural items and arts and crafts.

The number of liquor licences were slashed from 65 last year to 21 this year, a decision organisers said was prompted by concerns from ACT Policing about alcohol fuelled violence despite only three arrests last year. Eighteen businesses will have liquor permits for the festival.

The Canberra Liberals' spokeswoman for multicultural affairs, Elizabeth Kikkert, said the policy "defies the spirit of exuberant multiculturalism that has been the hallmark of the festival since its beginning" and was "driving stallholders away from the celebrations".

"This a real shame considering the National Multicultural Festival has a decades-long history that has created its unique character in the Canberra community," Mrs Kikkert said.

At the festival's official launch on Friday, Multicultural Affairs Minister Rachel Stephen-Smith acknowledged there were fewer stallholders this year.

However Ms Stephen-Smith said it would be an "absolutely fabulous" festival regardless.

"There's about 340 stallholders across the footprint this year. That's slightly fewer than we had last year and that's partly in response to feedback that we had that the footprint was a little too crowded but the footprint is adjusted every year as well in response to things like new outdoor construction, new outdoor seating at restaurants, that kind of thing," Ms Stephen-Smith said.

"We had an initial aim of 320 stalls, we've now got about 340. We don't know whether the [liquor licensing issue] had a bearing or not, the demand for stalls was very strong this year as it is every year and we've accommodated that. I think we'll wait and see what the experience is."

Ms Stephen-Smith said the rapid growth of the event had forced festival organisers to reexamine how the event was run.

Officials had now met with members of the Tongan community who were concerned they would not be able to sell traditional arts and crafts at the event and had assured them they would be able to, Ms Stephen-Smith said.

Asked if the festival now struck the right balance between community and commercial interest, Ms Stephen-Smith that that would be looked at in a review of the event.

"The national Multicultural Festival has become a major event on Canberra's events calendar, there's no doubt about it," Ms Stephen-Smith said.

"When you have 280,000 people flocking to Australia's biggest celebration of cultural diversity, you really need to manage the risk around that appropriately and I think thats what festival organisers do every year and every year in order to do that they take on board the feedback from the community."

Ms Stephen-Smith said because it had become such a big event, it required more regulation.

"One of the things we'll be talking to the community about is do we want to retain more of a community focus, how do we make sure we do that," Ms Stephen-Smith said.

"I think the festival organisers have really tried very hard to ensure they've engaged the multicultural community in planning this festival and that's always the case and we'll continue to do that in future."

The 2018 National Multicultural Festival is on: