He expanded his role to give commanders wrongheaded advice on terrorism while setting the strategy of deferential police negotiators, Coroner Michael Barnes found.

The "flawed advice" provided by the psychiatrist and the negotiators then led commanders to hold back from ordering an assault to end the siege.

The psychiatrist, whose name was suppressed, told police they should not treat the hostage-taking by the gunman Man Haron Monis as an Islamic State attack, as it was inconsistent with IS methods.

He was unaware IS had called for "lone-wolf" attacks for years, and the group's chief propagandist had made another such call three months before the December 2014 siege.

Monis was simply "grandstanding", the psychiatrist found. He would tell the inquest that he did not mean to imply that Monis was only bluffing.

But the coroner found the top police commander, Mark Murdoch, had taken the psychiatrist to mean precisely that.

Mr Murdoch and his successor, the night commander Mark Jenkins, both relied on the psychiatrist's advice in deciding not to launch a surprise assault on the stronghold.

Fifteen minutes before Monis executed hostage Tori Johnson, Mr Jenkins said he was more optimistic of a negotiated resolution than at any other time in his shift.

The psychiatrist had said Monis had begun to "settle" in for the night, despite other signs he was "increasingly agitated and hyper alert," the coroner said.

In their submissions to the inquest, the NSW police said the psychiatrist did not help to make decisions.

But this was contradicted by the primary negotiator, codenamed Peter, who said the psychiatrist approved negotiation strategies.

"There's no limit - I'm not going to tell [him] 'that's enough, I don't want to hear'," Peter told the inquest. "I let him go, like everyone else does."

Mr Barnes found: "The consultant psychiatrist's advice carried disproportionate weight in the minds of negotiators and led to their being overly deferential to him and reliant on him."

The negotiation team was criticised in the inquest by a British team, who found the NSW officers had "gone in circles" and never reconsidered their strategy.

The coroner agreed they made no progress over the course of the 17-hour siege. The negotiators failed to make direct contact with Monis, who preferred to use hostages as intermediaries.

What is more, negotiators missed calls from hostages in the hours before the siege's violent end.

Four calls were missed when the negotiating team conducted a hand-over briefing all at once, rather than staggering the hand-over. Hostage Selina Win Pe had recently told them Monis would shoot her if a demand to turn off lights outside the cafe was not met.

The negotiators did not keep proper records of their tactics and Monis' demands. Their team leader, codenamed Graeme, worked a 33-hour shift in which he managed four other stand-offs around NSW at the same time.

"Inevitably, his performance would have degraded as he became fatigued," Mr Barnes found.

He recommended police establish a special cadre of counter-terrorism negotiators to deal with any future siege. He also called for a panel of consultant psychiatrists to prevent any one individual assuming too much power.