Government senators have called for action to protect Chinese students from the government in Beijing "spying" on their activities in Australia.
Liberal Eric Abetz asked Foreign Affairs officials on Thursday whether they had told China that the practice was, "to use polite language, not appreciated".
"Have we expressed any views to the Chinese regime as to the social credit scheme?" he asked, referring to China's plan to rank its citizens. "Or do we just say that this is a matter for a sovereign nation to determine, or do we say it's an abuse of human rights?"
Foreign Affairs secretary Frances Adamson said officials were still trying to get a sense of how the social credit system would work in practice.
Ms Adamson, the country's most senior foreign affairs bureaucrat, also pointed to key differences in "values" between Australia and China in a relationship that would need careful managing as China emerged as a larger power in the region.
There is "no point in us pretending" the differences did not exist, she said, speaking at estimates hearings.
"It will be a relationship where we will need on both sides to manage what I really think will be enduring differences ...
"I speak as a diplomat in saying that that will require, I think, some skill on our side, their side, and indeed diplomats across the world as China emerges further, as it grows, as its own objectives occasionally we find are contrary to ours."
Australia's relationship with China has occupied the government and the Parliament, with concerns about Chinese surveillance of students in Australia, major cyber hacking attributed to China, including at the Australian National University and possibly also Parliament itself, and pushback from Chinese officials and community groups about growing anti-China sentiment. Australia is furiously trying to regain ground in the Pacific lost to China as it locks Pacific countries into commercial and diplomatic deals.
Earlier this month, Home Affairs Minister Peter Dutton sparked a fierce rebuke from China when he hit out at China's actions in Australia.
"We're not going to allow university students to be unduly influenced. We're not going to allow theft of intellectual property and we're not going to allow our government bodies or non-government bodies to be hacked into," Mr Dutton said, comments that China said were "shocking" and "a malicious slur".
Ms Adamson said the relationship was a subject of "keen interest and conversation".
Fellow Liberal Concetta Fierravanti-Wells said an estimated 40,000 Chinese students went on to become citizens each year after studying here.
"This is not a hypothetical, this is an actual. This is happening now. So surely we must be giving some thought as to how we deal with this," she said.
Labor senator Tony Sheldon said the financial arrangements as well as political and personal activities of students were being monitored at an unprecedented scale and he was "deeply concerned" that might extend to Australian citizens.
Ms Adamson said the concerns were "very real".
"No one should be taken to task for exercising freedom of speech," she said, insisting that where officials "become aware of activities which indicate that diplomats or consular officers in Australia are undertaking activities or behaviours that are inconsistent with their status we are very quick to draw that aspect of it to their attention".
Many embassies and consulates kept a "friendly eye or sometimes a less friendly eye" on students, she said. Australia did not know precisely how that information was used.
The government's university foreign interference taskforce would consider the treatment of students, she said.
"We are concerned to ensure across our own country where of course our laws apply that students ... are able to have a full Australian educational experience, and from time to time ... we have things to say about activities that consulates general undertake," she said.