Foreign Minister Julie Bishop says a clear and precise analysis is needed of Turkey's shooting down of a Russian military jet on the Syrian border.
"There will not be any military retaliation, but clearly there must be an investigation as to what occurred," she told reporters.
Ms Bishop said the incident underscored the complexity of the situation in Syria and Iraq.
Both sides of Australian politics are backing international calls for calm over the incident, which has infuriated Russia.
US President Barack Obama said Turkey had "a right to defend its territory and its airspace" but cautioned against any escalation, while NATO chief Jens Stoltenberg also called for calm.
Cabinet minister Josh Frydenberg agreed, telling Sky News: "That's absolutely right."
Mr Frydenberg described it as the "most serious incident between NATO and Russian forces in nearly half a century".
With so many aircraft from different nations over the region there was a chance of miscalculation, he said.
"I'm sure this story is just at its beginning.
"It shows how fluid, how dynamic, how dangerous the situation is."
Opposition foreign affairs spokeswoman Tanya Plibersek says Australia should not be talking about backing one country over the other.
"We need to resolve the situation so that there isn't this sort of confusion in the future," she told reporters in Canberra.
"All countries involved must work to de-escalate tensions and to improve the communications between militaries."
Turkey and Russia needed to keep lines of communication clear and co-ordinate their efforts against Islamic State, Ms Plibersek said.
Crossbench senator Jacqui Lambie believes the incident is a game-changer and is worried the situation will worsen.
"I do not see President Putin sitting back and taking this, I believe it is going to get very nasty in the next 48 hours," she told reporters.
The senator is calling on the government to go back to the drawing board and come up with a new plan for its role in the conflict.
"Unless we go in there heavy handed and open a dialogue with President Putin, then please withdraw our troops out of there, get us out of there now."
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