Brighton terror victim named as Kai Hao by Malcolm Turnbull

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Mr Andrews said he has received advice from Victoria Police that there are 20 Victorians now part of a deradicalisation program, including people who have served their sentences but are not on parole, some who never went to prison and some that are now behind bars. Three officers were injured in the gunfire, and Khayre was eventually killed.

He first came to the attention of counter-terrorism police in 2009, when he was one of five men accused of plotting an attack on Sydney's Holsworthy Army base to kill soldiers.

Hours after the fatal shootout, the IS claimed responsibility for the attack.

"We believe this person was there with those sorts of [terrorist] intentions, albeit we don't know whether it was something planned or something spontaneous at this stage", he said.

Police were called after neighbors heard the shotgun discharge as Khayre killed a Chinese-born Australian man employed by the escort agency in the lobby.

He forced her to call Channel Seven news in Melbourne during the stand-off with police, then said: "This is for IS (Islamic State)".

One police officer was shot in the neck and ear and two officers suffered wounds to their hands, but none of the wounds was life-threatening, Mr Ashton said.

Police have confirmed they are investigating whether the incident is terror-related, but said it was just one line of inquiry.

Police search the home of Yacqub Khayre at Roxburgh Park, Melbourne, Australia, 06 June 2017.

A police auto is pictured outside the Buckingham Serviced Apartments in Bay Street in Brighton in Melbourne, Australia, after a shooting, June 5, 2017.

"There have been too many cases of people on parole committing violent offences of this kind", Turnbull told reporters.

The gunman had arranged to meet the woman through an escort service before taking her hostage, he said.

"There needs to be a look at why recidivism rates are what they are and whether jails are operating as universities of crime or whether they are being effective in enabling prisoners to address their issues", he said. "And making sure that all the intelligence that was coming and information coming from this investigation is being passed around to all state jurisdictions so everybody is on the same page", Australia's acting police commissioner Michael Phelan said.

Police are investigating whether Khayre tried to lure police into an ambush.

In the wake of recent terror attacks across the world, Mr Jones said authorities need 'to stop watching them (terrorists) and lock them up'.

Three police officers were hurt in a stand-off lasting more than an hour at an apartment building in the beachside suburb of Brighton, police said in a statement.

The Herald Sun reports that in 2012 he was sentenced to 5 1/2 years in prison for aggravated burglary and beating a woman in her home.

Prior to his arrest that year, Khayre travelled to Somalia to attend a training camp, where, according to his uncle, "weapons and military training may have happened".