Malcolm Turnbull sees no reason for Australia to have a missile defence shield despite threats of a nuclear strike by North Korea.
The prime minister's comments coincided with a warning by US President Donald Trump of a major conflict with the rogue state.
"Obviously, as threats evolve our response to them would evolve but right at the moment we do not deploy ... the anti-missile system that is being deployed in South Korea," Mr Turnbull told Neil Mitchell on 3AW radio on Friday.
The prime minister was referring to the THAAD (terminal high-altitude area defence) system, which is effective against short- to intermediate-range ballistic missiles.
"What we are doing in terms of stopping North Korea is continuing our pressure on the regime through extensive economic sanctions, which is designed to bring North Korea to its senses."
Mr Trump said a major conflict with North Korea was possible over its nuclear and ballistic missile programs, while China said the situation on the Korean Peninsula could escalate or slip out of control.
The president said he wanted to resolve the crisis peacefully, possibly through new economic sanctions, although a military option was not off the table.
"There is a chance that we could end up having a major, major conflict with North Korea," Mr Trump said in an interview with Reuters at the Oval Office.
"We'd love to solve things diplomatically but it's very difficult," he said, describing North Korea as his biggest global challenge.
Chinese Foreign Minister Wang Yi said there was a danger the situation on the Korean Peninsula could escalate or slip out of control.
Mr Wang made the comments in a meeting with a Russian diplomat at the United Nations, the Chinese foreign ministry said.
China, the only major ally of North Korea, has been increasingly uncomfortable about its neighbour's pursuit of nuclear weapons and long-range ballistic missiles in violation on UN resolutions.
Mr Trump lavished praise on Chinese President Xi Jinping for trying to rein in Pyongyang, calling him "a good man".
"I believe he is trying very hard. I know he would like to be able to do something. Perhaps it's possible that he can't. But I think he'd like to be able to do something," Mr Trump said.
Mr Turnbull remains quietly confident China will use its influence.
"My impression is they are showing a greater awareness of the need for them to bring their influence to bear on North Korea but this is a difficult situation," he said.
"North Korea is not a satellite state of China in the way say East Germany was of the Soviet Union in the days of the Cold War. So the Chinese have their own frustrations in dealing with Pyongyang."
US Secretary of State Rex Tillerson said China had asked North Korea not to conduct any more nuclear tests.
Beijing had warned Pyongyang it would impose unilateral sanctions if it went ahead.