Australia mourns after tragic end to cafe siege

Emotions were raw as Australia awoke to the news that two hostages were killed when the day-long siege reached a climax in the early hours, as police commandos stormed the Lindt eatery in response to the Islamist gunman opening fire.

A sea of flowers were laid at a makeshift memorial near the scene in the heart of Sydney's financial quarter, as Muslim community leaders joined their fellow Sydneysiders in mourning the victims, who were acclaimed as heroes.

"They were just going to work like everyone else, just going to get a cup of coffee. That could have been absolutely anyone," one of those bearing flowers, Angelica Haifa, told AFP.

Police in SWAT-style gear hurled percussion grenades and opened fire as they stormed the cafe just after 2:00 am on Tuesday, following a standoff of more than 16 hours. The 50-year-old lone gunman, widely named as Man Haron Monis, was shot and killed in the exchange that followed, officials said.

Two of the 17 hostages died: cafe manager Tori Johnson, 34, and mother-of-three Katrina Dawson, 38.

Six others were wounded, including three women with gunshot wounds, among them a 75-year-old. Two pregnant women were taken to hospital as a precaution.

At a prayer service in St Mary's Cathedral near the cafe, Archbishop Anthony Fisher said the "heart of our city is broken by the deaths of two innocents".

"Reports have emerged this morning of the heroism of the male victim of this siege," Fisher said.

"Apparently seeing an opportunity Tori Johnson grabbed the gun, tragically it went off killing him. But it triggered the response of the police and eventual freedom for most of the hostages.

"Reports have also emerged that Katrina Dawson was shielding her pregnant friend from gunfire. These heroes were willing to lay down their lives so others might live."

New South Wales Deputy Police Commissioner Catherine Burn did not confirm the chain of events, only that investigators were still working out what happened.

Prime Minister Tony Abbott said the hostage-taker, who at one point had unfurled an Islamic flag at the window of the cafe, "had a long history of violent crime, infatuation with extremism and mental instability".

"As the siege unfolded... he sought to cloak his actions with the symbolism of the ISIL death cult," he said, referring to the Islamic State group, while praising police for their response "to this brush with terrorism".

The man was out on bail for a series of violent offences, officials conceded.

New South Wales Attorney-General Brad Hazzard admitted there were serious questions over why he was free after being charged with being an accessory to the murder of his ex-wife and other offences.

"We are asking state agencies and federal agencies to look very closely at how this offender slipped through the cracks," he told reporters.

The Muslim community, which condemned the hostage-taking and the use of the flag, won sympathy from ordinary Australians on its handling of the crisis.

Flags on all federal and New South Wales state buildings flew at half mast, while condolence books were opened.

The pre­Christmas siege of the Lindt chocolate cafe began Monday morning and triggered a massive security lockdown in the bustling financial district as hundreds of police surrounded the site.

Reports said the gunman forced hostages to make videos with demands during the standoff, including that Abbott call him and that an Islamic State flag be delivered.

Monis's former lawyer Manny Conditsis said the public could be assured that it was not the work of an organised terrorist group.

"It's not a concerted terrorism event or act. It's a damaged­goods individual who's done something outrageous," he said of a man who arrived in Australia as a refugee in 1996.

Australia has been on high alert in recent months with the government raising concerns that citizens who have fought alongside Sunni jihadists in Iraq and Syria could return home radicalised and carry out "lone wolf" attacks.