Australian Prime Minister Tony Abbott has said that the government's push to force telecommunications companies to retain customer data for two years could have aided police in identifying the hostage taker as a threat before the siege in Sydney on Monday.

Early on Monday morning, Man Haron Monis entered the Lindt cafe in Martin Place in Sydney with a shotgun, and held the 17 customers and staff members in the cafe hostage, making demands to speak to the prime minister and to obtain an Islamic State flag.

The hostage situation came to a horrific end shortly after 2am AEDST on Tuesday, when police were forced to enter the cafe after Monis began firing his gun. Two of the hostages and Monis were killed.

After Monis had been named, it became clear that he was well known to police for sending offensive letters to the families of Australian victims of terrorism and Australian troops killed in Afghanistan. He was also on bail after being accused of being an accessory to the murder of his ex-wife.

The police and the New South Wales coroner are now conducting an investigation into the incident. Abbott said in a press conference on Tuesday that it is too early to say what police could have done to prevent the tragedy, but said that the government is moving to protect Australian citizens with its controversial tranches of national security legislation.

The third tranche, currently before the parliament, would force telecommunications companies to retain an as-yet-unspecified set of customer data for two years for access by law enforcement.

Abbott said that monitoring Monis might not have prevented the tragedy.

"Even if this individual had been monitored 24 hours a day, it's quite likely, certainly possible, that this incident could have taken place, because the level of control that would be necessary to prevent people from going about their daily life would be very, very high indeed. That said, we are always looking at what can be done better. We are always looking at what lessons can be learned and how things can be improved," he said.

Abbott said it may turn out that such legislation could have helped police.

"It's too early to say, because we don't know exactly what kind of communications this individual has had with others -- we just don't know. We may well discover that it would have helped to have this additional legislation in place, but it is too early to say," he said.

"What I think is clear is that we do face a very real threat from people who want to do us harm and who invoke this death cult ideology as a justification. And that's why we put forward the metadata-retention laws, that is why we are determined to deal with them as quickly as we can in the New Year.

"The assurance I give to you and to every Australian is that this government will do whatever is humanly possible to keep you safe. That's what we will do, because nothing undermines a society, a community, an individual, than any sense that you are not safe in your own homes, in your own streets."

While Abbott indicated that Monis had not been on any terrorist watch list, he was known to police. Under existing legislation, police can send preservation orders to telecommunications companies to retain the data for certain individuals of interest before obtaining a warrant.

It comes as the Australian Federal Police will be one of the first to appear before the Joint Parliamentary Committee on Intelligence and Security on Wednesday to speak about the mandatory data-retention legislation. In a press release on Wednesday, AFP commissioner Andrew Colvin said data retention is a critical tool for the identification of serious criminal offences.

"When we are dealing with serious threats to national security and other serious crime, we can't afford to rely on luck to see if the company the criminal has chosen to use keeps that data or not."