Hassan Khalif Shire Ali was on bail for routine traffic offences when he killed one man and injured two others during a stabbing rampage in central Melbourne.
The state government had backed the decision to extend Shire Ali's bail, but the opposition on Friday said the 30-year-old should have been off the streets.
Attorney-General Martin Pakula said Shire Ali was facing "routine driving offences".
"He had no history of violence. Bail was not opposed by police, remand was not sought by police," he told reporters.
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"There are something like 18-20,000 cases per year of people who are driving with a cancelled licence and it is entirely uncommon - as rare as anything - for police to seek to cancel bail in those circumstances."
But shadow attorney-general John Pesutto said under laws proposed by the Liberal-Nationals, Shire Ali would have been in custody after having repeatedly breached bail conditions.
"It shows just how messed up our justice system has become, that someone could repeatedly breach the terms of their bail and be free to commit the atrocity that he did," he said.
"Our justice system needs change."
The government was critical of Mr Pesutto's "politicisation of tragedy".
Melbourne restaurateur Sisto Malaspina, 74, was killed and two other men were wounded in the November 9 terror attack on Bourke Street.
Shire Ali was shot by police and died later in hospital.
His 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.
