During a psychotic rampage David Wyatt, 24, repeatedly stabbed his partner and severed his 15-day-old daughter's ear before killing himself and his two-year-old son Jakob in March 2009.
Counsel assisting the inquest Amanda Taylor said Mr Wyatt had called the mental health triage service only hours before, telling them he'd smoked cannabis and thought he was going to die.
"He was told to have a warm shower, a warm drink and to relax," Ms Taylor told the South Australian Coroner's Court today.
Ms Taylor said state agencies failed Mr Wyatt after he was released into the community in 2006 on a four-year supervised release licence after being found not guilty of robbing a woman due to mental incompetence.
"Everybody involved in the matter knew Mr Wyatt was taking drugs. He presented to emergency departments in psychotic rages and nothing was done about it," she said.
Ms Taylor said agencies failed to act after concerns were raised about risks to his children.
"It appears that none of the agencies who were involved ever spoke to each other ... or came up with a strategy to cope with Mr Wyatt in the community," she said.
"Nobody seems to be acting for the risk [the children] were exposed to."
The court heard Mr Wyatt suffered hallucinations and heard voices telling him his parents were "Nazis" and messages from the TV.
He repeatedly breached his supervised licence, which led to stints in the James Nash House mental facility, but they did not revoke his licence.
A witness to the inquest, South Australian parole board member Frances Nelson, called for more coercive powers to deal with drug-using psychotic offenders.
"We have no power of sanction if someone breaches their licence. All we can do is ask the court through the Department of Public Prosecutions to revoke their licence," she said.
Ms Nelson said a lack of beds meant there were practical problems in revoking licences for the state's 200 mental health offenders.
"It is unrealistic to de-institutionalise these people to the extent they are pushed into the community where they can't cope," she said.
"[But] if you need to revoke a licence, where do you put them?"