A senior NSW police officer in charge of the Sydney siege has told an inquest he referred upwards because he thought the events at the Lindt Cafe were an act of terrorism.

Assistant NSW Police Commissioner Michael Fuller was in charge of the first two hours of the siege in December 2014 in which two hostages and gunman Man Haron Monis died.

The inquest heard the police response was at first a conventional one and included calling in negotiators, police snipers and setting up a command centre.

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Assistant Commissioner Fuller said at first he did not know how many hostages were inside the cafe and he called in the Police Tactical Response Group.

“My feeling was that it was a high-risk situation and it would require a tactical response at the highest level,” he said.

He said police at first kept a “contain and negotiate” holding pattern on the situation because it gave them a chance to safely assess the situation.

“You interrogate the environment to work out what you are dealing with,” he said.

Siege had a ‘terrorist feel’

Assistant Commissioner Fuller said they had to determine if the siege was a “robbery gone wrong” or some other incident.

He said after around two hours he referred upwards because he had a gut feeling something was “seriously wrong” and the siege had a “terrorist feel” to it.

People run from the Lindt Cafe on the night of the deadly Sydney siege. Photo: Getty

He said it was “not unreasonable” to think Monis had an explosive device with him.

Mr Fuller said he was also told during the first two hours of the siege that Monis had made threats about bombs planted in other parts of the Sydney CBD.

“I thought he was trying to create chaos – outside of the environment – not just inside,” he said.

Assistant Commissioner Fuller said he wanted to try to find out more about the gunman and asked for any council CCTV footage from Martin Place that might help.

He said seeing an Islamic flag held up at the cafe window by hostages also increased his belief the incident was an act of terrorism.

The inquest heard the siege was declared a terrorist act after around midday.

It also heard that NSW Police are still trying to have some of their evidence heard in closed court.

NSW coroner Michael Barnes is expected to hear their arguments for the closed court on Wednesday afternoon.

-ABC