An Australian navy helicopter was forced to take evasive action after a Chinese air force plane launched flares closely ahead of it over the Yellow Sea on Saturday.
Australia and the US have branded the incident as unsafe and unprofessional, with Canberra raising its objections through diplomatic channels.
China dismissed the concerns, with foreign ministry spokesman Lin Jian asserting "the Australian military aircraft flew near China airspace in a threatening way".
The flares were a warning to the Australians, he said.
Beijing's explanation wasn't satisfactory, Mr Albanese said.
"There's no question that the Australian Defence Force personnel were both in international waters and in international airspace," he told reporters in Perth on Wednesday.
Australia conveyed its concerns to China's ambassador, Mr Albanese said.
Australian Strategic Policy Institute executive director Justin Bassi said without unconditional condemnation, this kind of behaviour would be incentivised.
"While shouting rarely gets you anywhere, the idea that our response needs to be tempered so as not to upset Beijing into giving us the silent treatment or some other form of punishment unfortunately already means that their coercion against us is working," he said.
The opposition has supported the government's position, saying it's entirely appropriate for Australian vessels to be active in international waters.
"It was not only not in China's territorial waters, it wasn't even in China's exclusive economic zone," opposition home affairs spokesman James Paterson told ABC radio.
"So it appears to be way out of the bounds of behaviour from the Chinese People's Liberation Army Air Force."
Senator Paterson wanted the government to go further in its language.
"These are incredibly dangerous things and the government's been describing them as unprofessional. I don't think unprofessional cuts it," he said.
"This is far worse than unprofessional because it's done with malign intent. It's done with intent to intimidate. It's done with intent to coerce and we shouldn't tolerate that."
