Scott Morrison has rejected China's claim that mass protests in Hong Kong are showing "sprouts of terrorism" and called for a peaceful resolution to the 10-week stand-off.
The prime minister says the situation in the Chinese territory is "very, very serious" and has urged political leaders to seek a peaceful resolution.
There are mounting fears China could be about to escalate its response to the mass rallies by anti-government protesters.
Chinese authorities have accused protesters, including those who shut down Hong Kong's international airport on Monday, of "serious crimes with sprouts of terrorism emerging".
Some Hong Kong legal experts have warned the use of the term terrorism could see extensive anti-terror laws and powers used against protesters.
Some flights out of Hong Kong resumed on Tuesday but many services were still listed as cancelled.
Mr Morrison has stopped short of telling Australians not to travel to Hong Kong but rejected China's characterisation of the protests as nascent terrorism.
"That's certainly not the rhetoric that I would certainly use to describe those events," he told reporters in Sydney on Tuesday.
"Of course we're concerned, particularly because of the number of Australians, residents and citizens, that are in Hong Kong, both on a long-term basis and on a short-term basis."
Consulate staff had been busy helping people stranded in Hong Kong because of the airport shutdown.
He said the Chinese territory's leader Carrie Lam must seek to de-escalate the situation and to listen "carefully to what people are saying in Hong Kong and work towards a peaceful and calm resolution of what is a very, very serious issue".
There are reports China's People's Armed Police have assembled for exercises in the Chinese city of Shenzhen, which links Hong Kong to China's mainland.
The Communist Party's official People's Daily newspaper said on the social media platform Weibo the police force could handle incidents including riots or terrorist attacks.
Australian travellers have been caught up in the airport shutdown, with Qantas and Virgin Australia flights between Australia and Hong Kong among those cancelled.
Australians stuck in Hong Kong have described chaotic scenes at the airport.
"Quite eye-opening to arrive from Paris into a sea of protests and find my onward flight to Sydney no longer existed," Australian Paul Dennett tweeted on Monday.
The Australian government's Smartraveller website continues to warn people to exercise a high degree of caution while in Hong Kong.
"Flash mob protests and random attacks on protesters have become less predictable and are expected to continue," it warns.
"Tourist and residential areas have been affected. There is a high risk of violent confrontation between protesters and police, or criminally-linked individuals."
Australian Associated Press