But other nations, including the United States, New Zealand and France, have expressed concern at the Chinese foreign ministry's use of the manipulated image on an official Twitter account.
"The CCP's latest attack on Australia is another example of its unchecked use of disinformation and coercive diplomacy. Its hypocrisy is obvious to all," the US State Department said on Wednesday, adding that while China doctored images on Twitter, its citizens were prevented from reading Twitter posts.
The department's deputy spokesman Cale Brown said the fabricated image of the soldier was "a new low, even for the Chinese Communist Party".
"As the CCP spreads disinformation, it covers up its horrendous human rights abuses, including the detention of more than a million Muslims in Xinjiang," Mr Brown wrote in a tweet.
US Ambassador to Australia Arthur Culvahouse on Wednesday also condemned China for defending the graphic fake photo.
“(China's) foreign affairs spokesperson thinks it appropriate diplomacy to spread disinformation through disingenuous statements,” Mr Culvahouse said.
This coms after France's foreign affairs spokesman said on Tuesday the tweeted image was "especially shocking" and the comments by Zhao "insulting for all countries whose armed forces are currently engaged in Afghanistan".
Mr Morrison used Chinese social media platform WeChat to criticise the "false image".
In a WeChat message on Tuesday night, Mr Morrison wrote that the diplomatic dispute over the image of the soldier "does not diminish respect and appreciation for the Chinese community in Australia".
He defended Australia's handling of a war crimes investigation into the actions of special forces in Afghanistan, and said Australia is able to deal with "thorny issues" like this in a transparent manner.
Australian special forces were allegedly involved in the murder of 39 Afghan civilians, according to the Brereton report's inquiry.
This included claims of Australian soldiers executing prisoners to “blood” junior soldiers and in other cases planting weapons on corpses.
Australia has previously said 19 soldiers will be referred for potential criminal prosecution for the killings of unarmed Afghan prisoners and civilians.
Mr Zhao's tweet, pinned to the top of his Twitter account, had been "liked" by 55,000 followers, after Twitter labelled it as sensitive content but declined the Australian government's request to remove the image.
Twitter is blocked in China, but has been used by Chinese diplomats who have adopted combative "Wolf Warrior diplomacy" tactics this year.
China says image which upset Australia is 'digital illustration' and not 'fabricated photo'
China's state-run Global Times media outlet has meanwhile continued to step up its anti-Australia rhetoric.
Source: Wuheqilin's Weibo account.
Calls to buy Australian wine around the world
The renewed tensions have prompted global concern about the Chinese government's behaviour on the world stage, inspiring a new campaign to drink Australian wine.
China on Friday imposed dumping tariffs of up to 200 per cent on Australian wine imports, effectively shutting off the largest export market for the Australian wine industry, amid the worsening diplomatic dispute.
“By drinking a bottle or two of Australian wine and letting the Chinese Communist Party know that we will not be bullied,” Swedish politician Elisabet Lann said.
"We are asking you all to join us in standing against Xi Jinping’s authoritarian bullying," European Parliament MP Miriam Lexmann said.
Chinese foreign ministry spokesperson Hua Chunying on Tuesday evening questioned why Australia had reacted so strongly to the image.
“The Australian side has made such a scene with this graphic because it wants to divert attention, avoid the real issue and relieve some pressure off its shoulder,” she said.
RBA Governor Philip Lowe told a parliamentary committee on Wednesday that Australia’s strained relationship with China would have “economic consequences”.