The decapitation of US journalist Steven Sotloff "abundantly justifies" the western response to Islamic State extremists in Iraq, Prime Minister Tony Abbott says.
The Islamic insurgents have released a video showing a masked militant apparently beheading Sotloff - just weeks after the killing of fellow journalist James Foley.
The video is entitled "A second message to America", and includes warnings to the United States and its allies to stop military operations against IS in northern Iraq.
Mr Abbott led Australian outrage to the beheading, saying it was an act of "pure evil".
The atrocities committed by Islamic State were "abominable, unspeakable, repellent, abhorrent", he said.
"This is a hideous movement that not only does evil, it revels in evil - it exalts in evil," he told reporters in Canberra.
"It abundantly justifies what Australia and other countries are doing to assist people who are threatened by this murderous rage, to protect people who are at risk of the murderous rage."
Foreign Minister Julie Bishop said the beheading was a "heinous crime" that illustrated why the government is so concerned about Australians travelling overseas to fight with IS.
"It's a despicable act, grotesque and it underscores the kind of people that we are facing here in Iraq and Syria," she told reporters in Canberra.
The RAAF has begun airlifts of weapons to Kurdish forces fighting Islamic extremists in the north of Iraq, and for weeks has been involved in humanitarian airdrops.
Joe Hockey declared Australia will not be intimidated by the IS "murderers".
Opposition leader Bill Shorten described the killing of Sotloff as "medieval".
"The intervention of humanitarian support by conscientious nations is simply to arrest the spread of this sort of ignorance, hatred and violence," he told reporters in Canberra.
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