A senior Australian lawmaker has said that future terror incidents involving one attacker aiming at a "soft target" would be difficult to stop despite greater security.

Home Affairs Minister Peter Dutton made the comments Monday after an Islamic State-inspired attack last week in Melbourne in which two people, including the attacker, were killed. 

Somali-born Hassan Khalif Shire Ali, 30, fire-bombed his car before stabbing one elderly man to death and injuring two others Friday in the central business district of Australia's second-largest city. 

The police shot Shire Ali and he later died of his injuries.

Ali was known to authorities, including intelligence agencies, and had his passport cancelled in 2015 over concerns he would try to go to Syria to fight for terror group Islamic State. 

But Dutton said Monday there was no evidence available to Australian intelligence services that Ali was preparing an imminent attack.

"You have got a soft target that is a place of mass gathering and you have got a low level of sophistication like somebody grabbing a kitchen knife - it is very hard unless you have direct evidence to stop," Dutton told Australia's ABC radio.

He added that such attacks have been made even harder to stop "because many terrorists are communicating through encrypted messaging apps and the agencies are not able to access that information." 

Earlier this year, Australia proposed a law that would compel technology companies, like Apple and Facebook, to provide access to private encrypted data linked to suspected illegal activities. 

The bill, which has been criticized by the federal opposition and privacy advocates, is still before the parliament. 

In the wake of Friday's attack Dutton has called for greater surveillance, saying nine in 10 of intelligence agency's targets were using encrypted messaging services.

He has also disclosed that Australian intelligence agencies have more than 400 high priority people on their watchlist and have stopped 14 attacks in the past four years.

One of the highest profile plots to be foiled was a plan to blow up a flight from Sydney to Abu Dhabi using a bomb disguised as a meat mincer in 2017. 

Meanwhile, tens of thousands of dollars have been raised for a homeless man who tried to help the police during the deadly attack.

Michael Rogers, dubbed "Trolleyman," used a shopping trolley to ram the Islamic State-inspired knifeman as two police officers were trying to disarm him.

More than 110,000 Australian dollars (79,000 US dollars) had been donated to the 46-year-old man by Monday morning on a GoFundMe page titled "Not All Heroes Wear Capes."

The fundraising effort was launched on Saturday by not-for-profit charity Melbourne Homeless Collective.

Victoria Police Deputy Commissioner Shane Patton said Rogers' help was "greatly appreciated" by police.

"There's no doubt he acted bravely," Patton told ABC radio. 

But later, Victoria Chief Police Commissioner Graham Ashton said while the man acted on instinct, his intervention could have led to a tragic outcome.

"Luckily in this case, it didn't," Ashton told Melbourne radio 3AW on Monday. "I think he was trying to support the police in his own way, so I haven’t been jumping on him over the weekend.” 

Shire Ali's family members have told local media that he was suffering from mental health issues in the lead up to the attack, however Victoria Police said they did not see "any formal record" of such issues.

Australian Prime Minister Scott Morrison said Monday that Shire Ali was "a terrorist" and mental health issues were just an "excuse."