Sandra Lee

Special for USA TODAY

SYDNEY — The gunman who took 17 hostages in Sydney was not on a terrorist watch list despite being well known to federal police and the Australian security agency, Prime Minister Tony Abbott said Tuesday.

The prime minister spoke as Australians laid mounds of flowers at the site in Sydney's central business district where 50-year-old Man Haron Monis held hostages for 16 hours at a popular cafe.

The siege ended early Tuesday with a barrage of gunfire that left two hostages and the Iranian-born gunman dead, and a nation that has long prided itself on its peace rocked to its core.

"If I can be candid with you the question we (are) asking (is), 'How can someone who has had such a long and checkered history not be on the appropriate watch lists, and how can someone like that be entirely at large in the community'," Abbott said at a news conference.

"Now that this incident has taken place, not withstanding the fact that the New South Wales Police and other agencies responded so well, we do have to ask ourselves the question: 'Could it have been prevented?' " Abbott said.

After the intense drama, Australians mourned Katrina Dawson, a 38-year-old mother of three, and Tori Johnson, the 34-year-old manager of the Lindt Chocolat Cafe. Both were killed in the siege.

"Apparently seeing an opportunity, Tori grabbed the gun. Tragically, it went off, killing him. But it triggered the response of police and eventual freedom for most of the hostages," Sydney's Catholic Archbishop Anthony Fisher said at an emotional memorial service attended by hundreds at St. Mary's Cathedral. "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 declined to comment on any individual's actions, saying what transpired in the cafe remained under investigation.

"This will all come out in time, no doubt," Burn said. "Can I just say, I think every single one of those hostages, every single one of those victims, acted courageously."

There was also a sense that Australia itself had changed.

"I'll never forget this day as long as I live," said Jenny Borovina, who was in tears with two friends while carrying white flowers to the site. She predicted that the effect of the standoff would leave a permanent scar on Australia's psyche. "Our laid-back nature has just changed," she said.

Like so many who work in the area, Borovina said she was locked down in her office near the cafe for more than four hours Monday before police gave her the all-clear to leave. During that time, she said, she called her son to say take care. She also called her aunt, asking her to look after her son if she didn't make it out alive.

Australian police had a long list of run-ins with gunman Monis, including dozens of alleged sexual assaults on women stemming from his services as a spiritual healer. Among the most serious allegations brought against Monis was accessory to the murder of his ex-wife.

He characterized himself on a website as a Muslim cleric persecuted by the government for his political views. Last year, he was convicted in connection with offensive letters to the families of Australian troops killed in Afghanistan. Those letters included comparisons to "Hitler's soldiers."

The self-styled Muslim cleric, who came to Australia as a refugee from Iran, complained of being tortured in prison for his political beliefs and said he was fighting for Islam and for peace.

Abbott said Tuesday that Australia's terror alert level had not been changed in the aftermath of the attack and that it remains at "high."

"If it was to go up another notch, that would be to indicate that a terrorist attack is imminent and while we can't say what the future holds I have no intelligence whatsoever to suggest that that might be the case," he said.

New South Wales Premier Mike Baird, speaking about Monis, said: "We are all outraged that this guy was on the street. We need to ensure that everything is done to learn from this."

Contributing: Donna Leinwand, Gregg Zoroya; Associated Press