The gunman behind the cafe siege in Sydney had dropped off the Australian national security agency's watchlist, Prime Minister Tony Abbott said.
Mr Abbott said Iranian-born Man Haron Monis was on the organisation's watchlist in 2008 and 2009 but was later dropped from it.
Speaking to the media, Mr Abbott said: "I don't know why he dropped off the watch list in those days, I really don't."
He said answers were needed as to why Monis, who faced a string of charges including being an accessory to the murder of his ex-wife, had been out on bail and also possessed a gun licence.
Mr Abbott said: "We particularly need to know how someone with such a long record of violence and such a long record of mental instability was out on bail after his involvement in a particularly horrific crime,"
He added: "And we do need to know how he seemed to have fallen off our security agency's watchlist back in about 2009."
Australian prime minister Tony Abbott did not speak to the gunman in the Sydney cafe siege following police advice.
Speaking at a press conference, Mr Abbott said he had been prepared to speak to Man Horis Man after he demanded to speak to him during the 16-hour siege at a cafe in Sydney.
Mr Abbott told reporters: "I said to my office when I became aware of this request that obviously I was prepared to do whatever the police advised was best in these circumstances and the advice we got from police was to have not contact with him."
It comes as he ordered an urgent review into how the security services handled Monis.
Mr Abbott said he wanted answers as to why Monis has been released on bail, had dropped off a terrorism watch list in 2009 and possessed a gun licence.
Australian Prime Minister Tony Abbott has refused to deny claims that Iran had tried, and failed, to extradite Sydney siege gunman Man Haron Monis in the past.
Answering a question during a press conference, Mr Abbott said he could not deny it - but said he would not confirm the story while the investigation was ongoing.
An urgent review has been ordered by the Australian government to answer a number of "obvious questions" about what could have been done to prevent the deadly siege at a Sydney café.
Prime Minister Tony Abbott said he and Premier of New South Wales Mike Baird have both now commissioned their respective secretaries to conduct the investigation.
In a press conference, Mr Abbott said the review would address how gunman Man Haron Monis was granted permanent residency, how he managed to stay on welfare for so many years, why he dropped off the security forces' watchlist in 2009, and how he got hold of a legal gun licence, among other issues.
It does need to be thorough. It does need to be swift. We do need to put the lessons into practice as soon as we can.
I will not rest until I am confident that you are as safe as any government can possibly make you.
He said the report is expected to be completed by the end of January.
Police in Sydney fought to keep a gunman who went on to kill two hostages in a 16-hour siege in custody - but were overruled by the courts, police chiefs have revealed.
New South Wales Police Commissioner Andrew Scipione said while the force had refused Man Haron Monis bail after he was arrested in connection with the murder of his ex-wife and for a series of sex offences, he was subsequently granted bail when he appeared in court.
We were concerned that this man got bail from the beginning.
We can apply and seek to have offenders like this not in circulation, but we do not make the final determination - that is a matter for the courts.
However, he stressed, the allegations against Monis contained nothing related to politically-motivated violence.
A Sydney-style terror attack could happen in Britain at any moment, Prime Minister David Cameron has admitted.
Asked by a committee of senior MPs how close the country was to a similar attack, Mr Cameron said: "The threat we face definitely includes those sort of self-starting sometimes quite random attacks that could happen at any moment in Britain.
"We've seen over the last few months there have been a series of plots that have been detected and prevented that would have seen police officer or other authority figures murdered in cold blood as Lee Rigby was murdered in cold blood.
"Its thanks to the brilliance of our policing and security services that these things have been prevented.
"But we can't count on them to prevent it every time.
Mr Cameron added: "People who are self-radicalised on the Internet who then suddenly do appalling things, that is much more difficult to prevent."
Prime Minister David Cameron has paid tribute to the hostages "murdered" in the siege in Sydney, Australia.
Speaking before the Liaison Committee, Mr Cameron said: "In Australia there are tales of extraordinary bravery and sacrifice that are now being told about what happened in that cafe.
"I think that's what we'd expect from the people of that remarkable and great country and our thoughts are with them".
The family of mother-of-three Katrina Dawson who died in a siege at a Sydney cafe have said they are devastated by her "tragic and senseless death".
"We are shocked and devastated by the tragic and senseless death of our darling Katrina," a statement said.
"She was an amazing woman and the most loving and loved wife, mother, daughter, sister, aunt, in-law and blessed with a wonderful circle of friends and colleagues.
"We would like to thank everyone who has provided their support and wishes over the past 48 hours and ask that we be allowed to support each other in private."
The siege at a cafe in Sydney will change Australia forever, a journalist has predicted.
Mike Bowers, the picture editor for the Guardian Australia, who was at the scene in Market Place when the deadly siege came to an end, said Australians had been left "deeply shocked" by the incident.
"There is no doubt these things change a country," Mr Bowers told ITV News.
The dramatic moment armed police brought the Sydney siege to a bloody end has been caught on camera.Read the full story ›