Labor has accused Opposition Leader Tony Abbott of harbouring extremists, as debate heated up over MPs' comments on Muslims and immigration policy.
Prime Minister Julia Gillard has called on Mr Abbott to send two senior coalition members - Senator Cory Bernardi and immigration spokesman Scott Morrison - to the backbench over their recent comments.
While Mr Abbott has resisted the call, he used a party room meeting on Tuesday to admonish the two members for going "a little too far" in their public comments.
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Senator Bernardi told a radio station last week that: "Islam itself is the problem - it's not Muslims".
He added that: "Islam is a totalitarian, political and religious ideology".
Mr Morrison gave a qualified apology a day after he publicly questioned the taxpayer-funded travel arrangements for asylum seekers attending the funerals of people killed in the Christmas Island boat tragedy.
It also was reported that Mr Morrison had suggested to shadow cabinet last year the coalition capitalise on fears about Muslim immigration.
But, Mr Abbott said, the coalition did not support a discriminatory immigration policy and believed Australia benefited from being a multicultural society.
"We will never say to perfectly good Australians that they are not fully valued in their own country," he told coalition MPs.
However, the federal parliament's only Muslim MP, Labor's Ed Husic, said Mr Abbott had allowed the comments to be "deliberately floated in the public arena for political advantage".
"The extremists continue to cloud commonsense and decency within the coalition," Mr Husic said.
"As I stand here today, I think of the mums, dads, students, small business people ... those drawn from the Islamic faith who are trying to do their best to contribute to the betterment of our nation.
"What are those people meant to feel when they ponder on how they were admitted to share the richness of life here but while others of their faith have been locked out?"
He said there was a potential impact on $30 billion of Australian exports to countries with large Muslim populations.
"Do we believe that people in these countries would not react?" he asked.
Former Howard government immigration minister Philip Ruddock told parliament the coalition would never seek to impose a discriminatory immigration policy.
He said it was coalition policy to ensure everyone upheld the Australian values of civic duty, cultural respect, social equity and productive diversity.
Mr Ruddock said Ms Gillard had not appointed anyone to the multicultural affairs portfolio after the 2010 election, until Kate Lundy was officially named in the position this week.
The prime minister described the comments over the past two weeks as a "dreadful spectre haunting the parliament and the nation".
Independent MP Tony Windsor said Mr Abbott was "preying on some of the same nerve ends" as Pauline Hanson and One Nation.
