Prime Minister Malcolm Turnbull believes the threat of nuclear proliferation in the Asia-Pacific is real amid US fears about a potential arms race if North Korea is not reined in.
But Australia's commitment to non-proliferation remains "rock solid" for the "far foreseeable future".
Senior Trump administration officials reportedly have told Foreign Minister Julie Bishop that other countries in the region, including Japan, would be compelled to seek their own nuclear military capability if North Korea escalates its intermediate-range missile program.
"That is why there is such a strong view that North Korea must be denied this capability," she told The Australia on Friday.
Mr Turnbull poured cold water on the suggestion Australia might need a nuclear weapons capability.
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"Realistically for the far foreseeable future, our commitment to non-proliferation is rock solid," he told Neil Mitchell on 3AW radio, adding the scenario of Australia acquiring nuclear weapons would only be plausible in a "dire environment".
Mr Turnbull said the alliance with a nuclear weapons-armed US was the basis of Australia's security.
Ms Bishop and Defence Minister Marise Payne next month are set to host US Secretary of State Rex Tillerson and Defence Secretary James Mattis for talks in Sydney.
"If we allow North Korea to develop nuclear weapons capability, combined with their ballistic missile capability, then they will become a rogue nuclear state in breach of international agreements," Ms Bishop told 2GB Radio.
"We have a window of opportunity in relation to economic sanctions and this is where we need China's support."
