Australia is tracking a Chinese surveillance ship making its way towards Queensland ahead of a joint military exercise with the United States.
Prime Minister Scott Morrison said Australia respected freedom of navigation in international waters but was "very wary" of the ship.
"They're in an area where they're allowed to be and we know they're there and we're keeping a close eye on it," he told Sydney radio 2SM on Wednesday.
When pressed, the prime minister conceded he was concerned about the ship.
"We wouldn't be watching them if we weren't," Mr Morrison said.
"Of course we watch them. We're aware of that. And they're watching us."
The Chinese electronic surveillance vessel is expected to arrive on Friday, closely monitoring Talisman Sabre war games taking place over the next fortnight.
Mr Morrison said the vessel had the same legal rights to be in the waters as Australian ships had to sail through the South China Sea.
"And so, we would just simply say that we think the same tolerances and the same appreciation of those international laws should apply."
