The Liberal frontbencher has copped backlash for his comment, and also for suggesting Australia's Muslim community could do more to help tackle extremism.

"We have some particular problems in Victoria, some of them judicial appointments," Mr Dutton told radio 3AW on Monday.

"While (Premier Daniel) Andrews talks tough during an election campaign about these matters, he spends the other three-and-a-half years being pretty soft on law and order.

"We see situations where people are given suspended sentences, or there is no deterrent, there's no impact that you might see in other jurisdictions of the custodial sentence."

Mr Andrews, who is halfway through his campaign to retain government at a November 24 election, refused to bite back.

"Now is not the time for those sort of pretty low-grade political arguments, and that's not something I'm going to engage in. I think they're beneath even Peter Dutton quite frankly."

Well-known Melbourne restaurateur Sisto Malaspina, 74, was killed and two other men were injured in Friday's terror event in Bourke Street when 30-year-old Hassan Khalif Shire Ali drove a ute into the city and set it alight before launching a knife attack.

As floral tributes built outside the cafe co-owned by Mr Malaspina, his family accepted the offer of a state funeral and paid tribute to the man who "loved this great city so much".

"Each customer of dad's was given the same respect and service regardless of their standing in society," their statement read.

Shire Ali's family said he was suffering mentally in the lead up to Friday's attack in Bourke Street.

"Please stop turning this into a political game. This isn't a guy who had any connections with terrorism but was simply crying for help," they have told media.

But police weren't aware of any health issues with the knife attacker, whose passport was cancelled by federal authorities in 2015 amid concerns the Somali-born man would try to go to Syria to fight for Islamic State.

Shire Ali was shot by an officer during Friday's attack and died later in hospital.

On Monday, one of his two surviving victims, a 24-year-old security guard, was released from hospital. Tasmanian businessman Rod Patterson remains in care.

Deputy Commissioner for specialist operations Shane Patton said Victoria Police reacted well to the attack.

"They intervened, they acted in accordance with their training and quite bravely dealt with this terrorist. He was shot dead very quickly," he told ABC radio.

Mr Dutton called on the Muslim community to work more closely with authorities to head off extremists.

It was a sentiment broadly backed by Mr Andrews.

"All of us have a responsibility if we see something that doesn't quite make sense, if we think someone has been caught up in this evil, evil ideology, then all of us should make the phone call, all of us should step up. That's a perfectly sensible thing to say," the premier said.

Friday's street attack came after a January 2017 car rampage through Bourke St which killed six people and injured dozens of others, and a December car attack on Flinders Street which hit 16 pedestrians, killing one.

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