Prime Minister Scott Morrison says he expects China to provide an explanation on the lasing of an Australian military aircraft by a Chinese warship off the Top End.
But China says Australia is 'throwing mud' over the incident.
Mr Morrison said Australia is using diplomatic channels to call for an investigation into the incident and called on China to explain how such a dangerous act could be undertaken by "what is supposed to be a professional defence force".
"This is completely unacceptable and so we have demanded there be an investigation of what occurred on the vessel," he told reporters on Monday.
"It was dangerous, it was reckless and it was unprofessional for what should be a sophisticated navy."
However, Beijing said the laser accusation was "not true" and defended the Chinese ship's movements as "normal navigation ... in line with relevant international law."
"We urge Australia to respect the legitimate rights of Chinese ships in relevant sea areas in accordance with international law and stop spreading false information related to China," foreign ministry spokesman Wang Wenbin said at a routine press briefing on Monday.
Mr Morrison also fielded questions on why Australia had publicly issued a statement against China when the government has been reluctant to name the country in the past.
"It happened. It is indisputable. It was a Chinese naval vessel," he said.
"It was possible that people could even see the vessel from our mainland so we disclosed that because this needs to be called out."
Mr Morrison said all "peace-loving" countries in the region should be demanding an answer from China.
"It's an Australian surveillance aircraft this time, what's next? It's very important that China explain themselves for this act of recklessness," he said.
He said the Chinese vessel had every right to traverse Australia's exclusive economic zone, just as Australian, United States and United Kingdom ships have the right to travel through the South China Sea.
"But it's not OK to be doing what occurred there," he said, questioning what Beijing's response would have been had the situation been reversed.
However an article from the Chinese state-run newspaper Global Times said Australia was 'throwing mud' over the incident and suggested the RAAF plane was flying too close to the Chinese naval vessel. It said there were two naval vessels involved.
The article said the incident "only exposes the Australian aircraft's unsafe, provocative close-in reconnaissance on the Chinese ships in the first place..." quoting unnamed experts.
A military expert named as Song Zhongping was quoted as saying it was "almost certain" the Australian plane had conducted close-in surveillance of the Chinese warships first.
"Australia failed to tell the public how close its aircraft flew near the Chinese vessels, so people could not tell if the Chinese vessels were forced to take defensive countermeasures, " Song said.
An unnamed expert in the article said almost all modern warships are equipped with laser rangefinders used to tell the distance between objects.
"They are also used for civilian purposes and are of little danger, the anonymous analyst said, noting that the Australian military knowingly hyped this with the aim of throwing mud at China, " the Global Times article said.
A statement from the Department of Defence said the incident happened on 17 February and involved a Chinese navy ship and a RAAF P-8A Poseidon surveillance plane.
"A P-8A Poseidon detected a laser illuminating the aircraft while in flight over Australia’s northern approaches, " the statement read.
A Royal Australian Air Force P-8 Poseidon aircraft. Source: AAP/Royal Australian Air Force
"The laser was detected as emanating from a People’s Liberation Army – Navy (PLA-N) vessel. Illumination of the aircraft by the Chinese vessel is a serious safety incident.
"Acts like this have the potential to endanger lives.
"We strongly condemn unprofessional and unsafe military conduct.
"These actions could have endangered the safety and lives of the ADF personnel.
"Such actions are not in keeping with the standards we expect of professional militaries."
Defence Minister Peter Dutton said the laser had the potential to blind the crew and disrupt the aircraft's radar.
"This is not a laser that you buy down at the shop," he told the Nine Network.
"This is a military technique and it is military-grade equipment."
Mr Dutton will write to his Chinese counterpart as defence department officials reach out to their counterparts, but a response may not be forthcoming given the frosty bilateral relationship.
Defence Minister Peter Dutton. Source: AAP
"We will see what sort of response, if any, we get," he said.
"We want that open dialogue, we want a good relationship. But Australia is not going to be bullied, we aren't going to walk away from our obligations to the rule of law."
Labor has also condemned the Chinese PLA-Navy vessel's action and sought a briefing from the defence department.
