"Times of uncertainty are exactly that and it's our job to work with everybody to reduce that uncertainty and that's what we're doing."

Defence Minister Christopher Pyne warned Beijing that any use of intimidation or aggressive tactics was viewed as "destabilising and potentially dangerous".

"Australia has consistently expressed concern over ongoing militarisation of the South China Sea and we continue to urge all claimants to refrain from unilateral actions that would increase tension in the region," he said.

Opposition foreign affairs spokeswoman Penny Wong backed Mr Morrison's call for calm.

"We shouldn't have a unilateral escalation of tension. We want to see disputes resolved peacefully," she said.

"We don't want increased risk on the seas and we certainly continue to advocate strongly for the observation of the international Law of the Sea."

But veteran Liberal backbencher and chairman of Parliament's foreign affairs and defence committee, Eric Abetz, said Australia should consider following the US's lead on freedom-of-navigation patrols.

While the government maintains that Australian warships exercise freedom of navigation when transitioning through the South China Sea, they are yet to sail within 12 nautical miles of a disputed feature.


"When these sorts of actions take place, if you give an inch, they take a mile," Senator Abetz told The Australian Financial Review.

"Freedom of navigation, if it is claimed, needs to be exercised in the area and not close to the area to indicate our strength of feeling.

"If one assumes the US does it then there is nothing that should be stopping Australia, as a highly respected middle player, indicating its strong support for the position taken by the US."

Another Liberal backbencher, former army officer Andrew Hastie, supported the US approach.

"My instinct is to always back your mates up. It's the right thing to do and if you don't, bullies will come for you next," he said.

In an interview with the Financial Review, Mr Pyne said Australia would always be upfront with China about its activities in the South China Sea but did not commit to sail throughs.

"If we decide to sail within 12 nautical miles of disputed territory, that will be a decision the government makes at the time and for good reasons, and we will know about it at the time. We're not going to be telegraphing those matters," he said.

According to the Pentagon, the Chinese ship came within 40 metres of the Decatur on Sunday, and a collision was avoided only when the US ship manoeuvred out of the way.

The US accused the Chinese of sailing in an "unsafe and unprofessional" manner, while Beijing hit back claiming the Decatur had violated its "indisputable sovereignty", despite a 2016 international court ruling rejecting its claims.

Sydney University's US Studies Centre director of foreign policy and defence program, Ashley Townshend, said China backed away several years ago from dangerously challenging ships and aircraft in the South China Sea because of the risk of conflict, instead focusing on building up and militarising disputed features.

He said China might be emboldened now that it had established its bases and with its relationship under strain with the US over trade, might feel like it needed to defend its territorial claims.