Prime Minister Tony Abbott has suggested that firearm laws may need to be changed as he said that the Martin Place gunman had a gun licence despite having a long criminal history that included being out on bail for being an accessory to murder.

As he announced an urgent review into the Martin Place siege that took the lives of two hostages, on Wednesday, Mr Abbott said that while he had great confidence in Australia's police and security agencies, there was a need to reflect on what could have been done better.

He said gunman Man Haron Monis had a licence for his gun and questioned existing gun laws, saying: "there are questions to be asked when someone with such a history of infatuation with extremism, violent crime and mental instability should be in possession of a gun licence".