Bourke St attacker had planned explosion for Melbourne's CBD

A vehicle can be seen on fire in Bourke Street Melbourne

A vehicle can be seen on fire in Bourke Street Melbourne

During the attack, police and civilians tried to subdue Shire Ali before a new police member, only three months out of the academy, shot him in the chest.

Police shot a knife-wielding man after he fatally stabbed one person and injured two others in the centre of Australia's second-largest city.

"He is certainly someone who is known to both us and the federal authorities in relation to counterterrorism and terrorism-related matters", he told Channel 7's Sunrise programme.

Ambulance Victoria said paramedics had assessed three people at the scene.

Victoria premier Daniel Andrews urged the public to avoid the crime scene, and thanked responding police officers.

But as the attacks continued unabated, eventually one officer opted for lethal force, shooting the suspect in the chest.

Police officers who apprehended the suspect are being treated for cuts and scrapes and are not thought to be in a serious condition.

Ashton said were not looking for any other attackers, but declined to categorise the incident as a "lone wolf attack".

Speaking to the media on Friday night, Chief Commissioner Graham Ashton said in light of Friday's incident, he had asked police to re-formulate public safety plans for Stakes Day at Flemington Racecourse, soccer at AAMI Park and Remembrance Day on Sunday.

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One witness claimed the assailant was yelling "allahu akbar" and is believed to be known to counter-terrorism agencies, the Melbourne Age reports.

The bomb squad was deployed to assess the area and television footage showed police combing the street for evidence.

"Australians will never be intimidated by these appalling attacks".

Witnesses said the man began attacking pedestrians near a pickup truck apparently belonging to the attacker which had exploded into flames.

The attacker, who has not been identified, was originally from Somalia but lived in Melbourne's northwest.

Bourke Street reopened on Saturday morning with an increased police presence in the area.

Police responded to the scene on Bourke Street after receiving reports of a vehicle on fire, Victoria Police Superintendent David Clayton told reporters shortly after the incident.

Investigators will also look at a potential copy-cat motive with the vehicle attack occurring after the second day of the highly publicised Bourke Street Mall multiple murder trial, where James Gargasoulas stands accused over the day his auto ploughed into 33 people, killing six.

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