As more details emerged about the incident, Prime Minister Scott Morrison came out swinging against the small minority who sought to divide Australians.

"I need to call it out. Radical, violent, extremist Islam that opposes our very way of life," he said in Sydney.

Mr Morrison, a devout Christian, said he was the first person to protect religious freedoms but that meant he also had to be the first one to call out extremism.

The prime minister said no religion was immune and it took on many forms around the world.

"But here in Australia, we would be kidding ourselves if we did not call out the fact that the greatest threat of religious extremism in this country is the radical and dangerous ideology of extremist Islam," he said.

Opposition Leader Bill Shorten echoed his political rival's sentiments during a brief press conference in Melbourne.

"We need to be ruthless and relentless against people who are going to commit this sort of violence in whatever twisted, perverse definition of ideology or religion makes them do this," he said.

But both leaders said it was important to remember Islamic extremism was not reflective of the wider Muslim faith.

"This is a small, radicalised portion of that general group and our best weapon to help keep us safe is working with the rest of the community to make sure that these extremist elements are identified, apprehended and dealt with," Mr Shorten said.

Mr Morrison said he had long-standing relationships with the Muslim community and it was them who had raised with him their concerns about radicalism in recent years.

"I have sat in the living room of a family whose four sons went and fought for ISIS," he said.

"And they all died. I have seen the look of complete loss in the eyes of a mother and a father ... confused by people who came and corrupted their children."

Mr Morrison said religious leaders needed to call out radicalism in their communities, adding the government and wider community also had to work with them.

He also urged Australians not to be intimidated by Friday's attack.

"Keep being yourselves, keep being Australians," he said.

"Be proud of who you are, because I know you are and that is what will ensure we will always defeat this insidious evil that comes at us every single time."

Mr Shorten also paid tribute to Pellegrini's restaurant co-owner Sisto Malaspina, who was the sole victim killed in the terror incident.

"He's a Melbourne icon," he said.

"I can't imagine the random misfortune which put him in the path of this evil wrong-doer."

Australian Associated Press