The prime minister said senior Defence officials continued to monitor three Chinese warships after they were spotted moving south about 280km off Sydney, in international waters, on Thursday.
Foreign Minister Penny Wong met with her Chinese counterpart and demanded answers as to why the vessels only offered limited notice before the firing was carried out.
China's actions are believed to have complied with international law and the Australian Defence Force has advised there was no imminent threat to its assets or those of New Zealand.
But analysts believe the sailing was an attempt by Beijing to project power and send a message to Canberra about China's capability.
Mr Albanese was asked on Saturday if he would call President Xi Jinping in light of the incident but instead defended China's right to carry out the exercise as it had not breached international law.
"It's important to not suggest that wasn't the case. What we have done is to make appropriate representation through diplomatic channels, including foreign minister to foreign minister," he said.
"They could have given more notice but Australia has a presence from time to time in the South China Sea (and) this activity took place outside of our exclusive economic zone. Notification did occur."
Australia has co-ordinated its response with New Zealand but not spoken with ANZUS ally the United States since the incident.
Opposition defence spokesman Andrew Hastie leapt on the prime minister's response, suggesting China's actions amounted to "gunboat diplomacy".
"This is Chinese warships imposing themselves on our commercial airspace and that's why I come back to that question for the PM, where's his limit?" he told ABC Radio.
"Why is he being weak about this? Why isn't he picking up the phone and making representations on behalf of the Australian people and our national interests?"
Defence Minister Richard Marles earlier said Australia had not received satisfactory answers when it queried the incident.
"They notified a live firing exercise but with very short notice, which meant that was very disconcerting for planes that were in the air," he told Channel Seven.
Australian officials said it was customary to give 24 to 48 hours notice of live fire activity.
Qantas, Emirates and Air New Zealand modified flight paths between Australia and New Zealand after receiving reports of live firing in international waters.
A Defence spokesperson said China advised via a radio broadcast on a civilian channel that it would carry out its drill.
"(China) did not inform Defence of its intent to conduct a live fire activity and has not provided any further information," a statement read.
Senator Wong met with Chinese Foreign Minister Wang Yi on the sidelines of a G20 meeting in Johannesburg on Friday.
Along with the increasing military tensions, she raised the case of Australian citizen Yang Jun, who has received a suspended death sentence in Beijing, and reiterated Australia's wider opposition to the death penalty.
Senator Wong said her discussions with China were "calm and consistent".
The live firing exercise follows a run-in with the Chinese military last week, when a fighter jet fired flares in front of an RAAF surveillance aircraft during a patrol over the South China Sea .
The government lodged a complaint with Beijing over the near-miss, fearing for the lives of the Australian personnel.
