The lone terrorist who fatally stabbed a man in busy Bourke St on Friday planned to cause an explosion in central Melbourne by igniting gas cylinders in his vehicle, police say.
The attack was carried out on a busy downtown street during the late Friday afternoon rush hour by Melbourne time.
Video from the scene showed a man swinging a knife at two police officers near a burning vehicle before he was shot.
The Melbourne attacker and some of his family members were known to counter-terrorism police.
In what is being treated as a terrorist attack, Mr Shire Ali set a vehicle alight then stabbed three men, one who died from his injuries.
Chief Commissioner Graham Ashton said on Saturday the Somalian-born Khalif, also known as Hassan Shire, was the brother of a man arrested by police late past year in relation to committing acts in preparation for a terrorist attack.
Ashton said police had spoken to Shire Ali's wife. One of the officers raises his weapon, a shot is heard and the man falls to the ground clutching his chest.
"It's fair to say he was inspired". "We're not saying there was direct contact. We're saying it was more from an inspiration perspective".
McCartney said the incident was a "reality check" for security agencies that "even with the fall of the caliphate (ISIL). the threat continues to be real".
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"I am the first to protect religious freedom in this country, but that also means I must be the first to call out religious extremism", Morrison said.
"We also take this opportunity to thank those very fearless and dedicated members of Victoria Police who did all of us proud in their very quick response in very risky circumstances".
"I want to point out that what we saw yesterday was an act of terror", said Andrews, who also described the attack as "pure evil".
The three passersby who were stabbed - all men - were all taken to hospital. He brandished a knife and stabbed three men, one of whom, who has yet to be identified, later died in hospital.
Police said that there was no known link to terrorism at this stage and that "we'll keep an open mind as to whether there's any link".
It's the second time in four years Australia has witnessed militant violence.
Video posted to social media showed chaotic scenes as bystanders scattered while the attacker fought with police and his victims lay bleeding on the footpath. The group provided no evidence for the claim. However, at a later inquest, the coroner of New South Wales state said the gunman's actions fell "within the accepted definition of terrorism".
The other two victims, Tasmanian retiree Rod Patterson, 58, and a 24-year-old security guard from Hampton Park, are recovering from surgery in hospital.
Friday's attack is a double blow for the city as it coincides with an ongoing murder trial of 28-year-old James Gargasoulas, who ploughed his auto into crowds in the same area in 2017, killing six people.