But, Mr McCartney said, he was never a target of joint counter-terrorism taskforce investigations and they did not believe he was a threat.

"The event yesterday for us is a reality check, even with the fall of the Caliphate... the threat continues to be real," he said.

"The assessment was made whilst he held radicalised views, he did not pose a threat in relation to the national security environment. Obviously the circumstances of how and when he moved from having those radicalised views to carrying out this attack yesterday will be a key focus of the investigation," he said.

Shire Ali, who came with his family had links to the Islamic State terrorist group, Mr McCartney said.
"It's fair to say he was inspired," he said.

"We're not saying was direct contact, we're saying it's from an inspiration perspective."

Mr McCartney said Shire Ali was not being actively monitored because of the perceived low threat.

Chief Commissioner Graham Ashton said police were looking into whether there was a link between Shire Ali and the trial of James Gargasoulas, who is accused of mowing down pedestrians in Bourke Street in January last year.

"That is something we are looking for, but it's nothing that's been obtained so far showing any ideological link between the ongoing trial and the publicity around that and this event," he said.
The pair do not know each other, he said.

Mr Ashton said Shire Ali had several gas cylinders in the car and had opened them, but did not successfully ignite them.

"It certainly wasn't anything remotely sophisticated and that was evidence by the fact it wasn't effective," he said.

The two police officers involved in the stand-off and then shooting of Shire Ali were receiving support. The officer who shot Shire Ali had only been out of the police academy for three months.

"These members found themselves in a dangerous situation very quickly, with seconds to react and I think they acted very bravely. I think that was evidence from the footage," he said.

Shire Ali, who lived in Melbourne's north-west and was originally from Somalia, was shot by police and later died at Royal Melbourne Hospital on an operating table.

He had driven a ute into Bourke Street near the Target store between Russell and Swanston streets, set it alight and began stabbing members of the public in what police described as a terror attack.

The horrific scenes were witnessed by hundreds of people in the crowded CBD street.

An imam and friend of Shire Ali's family has told The Age that the 30-year-old had complained of being chased by "unseen people with spears" in recent weeks, and said they had been worried about him for some time.

Mr Ashton said the scene of the attack was re-opened to the public about 7am, but police would maintain a visible presence.

Events across Melbourne, including the Stakes Day race meeting and a soccer game at Marvel Stadium, would see a higher level of security, but there was no known threat.

“We don’t have any specific information in relation to threats to those events,” he said.

Mr Ashton said investigations were ongoing. Thirty-five witnesses had given statements, and he asked that anyone with footage to send it to Crime Stoppers.

Mr Ashton said while the man who tried to help police with a shopping trolley did what he thought was right at the time. But he warned citizens to be careful when stepping in.

"People have got to be careful doing that, not to put themselves in harms way when police are there," he said.

Pellegrini's co-owner killed in attack

Meanwhile, the man killed in Friday’s terror attack has been identified as a co-owner of iconic Melbourne restaurant, Pellegrini’s Espresso Bar.

Sisto Malaspina was the man fatally stabbed by Shire Ali on Bourke Street.

The Melbourne dining institution is closed for business as staff and regular customers pay tribute to Mr Malaspina.

A floral tribute to Mr Malaspina, who took over the restaurant with his business partner Nino Pangrazio in 1974, adorned the front window of the famous restaurant as staff and regulars stopped to pay their respects.

A visibly upset Mr Pangrazio said he was shocked by the death of his long-time business partner and friend.

“He was just so happy go lucky and always with a smile. We hardly had a cross word in the whole time we worked together. Just devastated.”

Staff and regular customers who had come to pay tribute were comforted by chaplains inside the restaurant.

On Saturday morning, the Joint Counter Terrorism Team began executing search warrants on two homes in Werribee and Meadow Heights.

Parents' home raided

Neighbours say they woke in the early hours of Saturday to dozens of police swarming the Werribee home of Shire Ali’s parents.

“I could see flashing lights from my bedroom window and then I heard police yelling into a megaphone and I got out of bed and saw police storming into the house,” one resident said.

The woman, who has lived in the street for more than a decade and spoke on the condition of anonymity, said she believed the parents and Shire Ali’s sister lived in the house.

Shire Ali and other family members would often visit, she said.

The small brick house was under heavy police guard and had been cordoned off.

It’s believed family members of Shire Ali were being interviewed by police there.

Police confirmed on Saturday that Shire Ali was the brother of a man arrested in relation to committing acts in preparation for a terrorist attack. Shire Ali was also known to ASIO.

“I’ve seen both the brothers visiting their parents over the years," the neighbour said. "They were always very smartly dressed and seemed to be polite and educated people. I’d often see the father and would wave to him across the street but they mostly kept to themselves.”

Forensic police wearing face masks took photographs as they searched through three cars parked in the driveway of the house.

Other heavily armed specialist police officers were scouring the outside of the house and front garden.

“It’s actually scared me a lot to think that two members of the family were involved in terrorism,” the resident said.

“The parents always came across as respectable people and when the first son was caught up in terrorism it came as a real shock … but what happened in Bourke Street yesterday has really brought it home for me.”

Another resident, Patricia Rouse, said the house which sits in a quiet residential street in Werribee has been raided numerous times over the years.

“They just seemed like an ordinary family, quiet until all this started happening," she said.

Victims in hospital

Prominent Launceston businessman, Rod Patterson, 58, was one of two victims in hospital. He suffered head injuries and underwent surgery. He is recovering at The Alfred hospital.

Mr Patterson's wife, Maree, posted a message on social media thanking everyone for their wishes.

"So unfortunately we got caught up in the attack in Bourke Street this afternoon and Rodney was hurt – good news is he is in a great hospital and doing OK given the circumstances," she wrote.

The other victim, a 26 year-old man, suffered neck injuries and was in a stable condition at Royal Melbourne Hospital on Saturday morning.

He is a security guard working at a shopping centre on Bourke Street. The man, from Hampton Park is an employee with SecureCorp, which provides security guards to the City of Melbourne.

A spokesperson from SecureCorp said the employee had been stabbed in the neck.

"He's fine," she said. "He was stabbed in the neck. He received medical attention... and has pulled through, is doing very well."

'Evil and terrifying'

Premier Daniel Andrews on Friday night condemned the attack.

"This is an evil and terrifying thing that has happened in our city," he said.

He thanked police and praised the efforts of the civilians who had tried to help them.

"Those strangers, people who were bystanders, who knew nobody involved, who stepped in without a moment's hesitation to render support and assistance ... make all of us proud as well," Mr Andrews said.

Meanwhile, Opposition Leader Matthew Guy said there should be no "moral squeamishness" when it came to dealing with extremism.

The Victorian government’s counter terrorism subcommittee of cabinet met on Saturday morning.

It is normal for people to have strong emotional or physical reactions following a distressing or frightening event. People can seek help and advice by visiting your local doctor or calling Lifeline 13 11 14, GriefLine 1300 845 745, or beyondblue 1300 224 636.