Australia tracked the spy ship over the past week as it sailed past the Harold E Holt naval communications station at Exmouth, in Western Australia, which is used by Australian, U.S. and allied submarines.
Prime Minister Scott Morrison said on Friday the Chinese navy vessel was not in Australian territorial waters but its presence was "concerning", amid an election campaign where China's behaviour in the region has been centre stage.
The question of a national security threat posed by China, including its expanding influence in the Pacific, has been a major theme in the campaign for the May 21 general election.
Asked on Saturday about whether the vessel's conduct was a "red line", Morrison said freedom of navigation was permitted around the world and the ship had not broken maritime laws.
"International law of the sea has not been breached," he told reporters on the campaign trail in Melbourne. But he said the issue highlighted challenges Australia faced from China "seeking to impose its will across the region".
The opposition Labor Party leader Anthony Albanese said on Saturday that he shared the government's concerns about the vessel and had sought a briefing.
Defence Minister Peter Dutton said this week that he considered the vessel's movement "an act of aggression" for travelling so far south.
China's foreign ministry spokesperson Zhao Lijian, asked about Dutton's comments on Friday, said he was not aware of specifics but that China always abided by international law and urged Australian politicians to "refrain from alarmism".
China's embassy in Australia did not immediately respond to a request for comment on Saturday.
Relations between Australia and China, major trading partners, have been strained recently over growing Chinese influence in the Solomon Islands, after the small Pacific island nation signed a security pact with China.
Chinese navy vessels have been tracked off Australia's northern and eastern coasts several times in recent years. The same Chinese vessel monitored Australian navy exercises with the U.S. military off the east coast last year.
In February, China and Australia traded barbs over an incident in which Australia said one of its maritime patrol aircraft detected a laser directed at it from a People's Liberation Army Navy vessel.
(Reporting by Samuel McKeith; Additional reporting by Martin Pollard; Editing by William Mallard)