Scott Morrison says he won't be drawn into a political "slanging match", as he remains under pressure to preference One Nation last at the next federal election.
The prime minister says the Liberal Party will wait until all candidates have been declared to decide on its preferencing arrangements, being the order in which it recommends voters support other parties.
Labor says that shows he is lacking leadership against hatred in the aftermath of the Christchurch massacre a week ago, which a lone gunman opened fire at two mosques during Friday prayers, killing 50 people.
One Nation leader Pauline Hanson has called for a ban on Muslim migrants to Australia and the outlawing of some of the religion's practices.
Asked whether Senator Hanson and One Nation Party are racist, Mr Morrison said there is a lack of understanding about Islam in Australia and that he doesn't share some of the party's views.
But he said it is not helpful to get into a "slanging match between all the personalities".
"What happened last Friday was abominable and I think the right response in relation to that is not to get into tit-for-tat between political parties," he told 3AW Radio on Friday.
"I think the right thing to do is to reach out to Muslim community and give them a big hug."
Mr Morrison said it's important the party holds off on making preference commitments as new, concerning candidates could emerge in the coming weeks.
"We've had people with very extreme views pop up in all sorts of seats."
Labor frontbencher Penny Wong said that attitude is not good enough at a time when the country is looking for leadership against hate speech.
The prime minister should at least to commit to putting all extremists at the bottom of the ticket, she said.
"On this one issue, surely, the Liberal Party of Australia could agree that they will put the extremists last," she told reporters in Canberra.
The debate comes after Mr Morrison shed further light on a 2010 shadow cabinet meeting in which he has been accused of encouraging colleagues to use community concerns about Muslim migration for political gain.
The prime minister, who has consistently denied the allegation by unnamed sources, says he was actually seeking to improve such attitudes.
"I was acknowledging that there were these fears in the community and that we had to address them, not exploit them," he told Ten's The Project on Thursday.
Reports of the meeting resurfaced online in the aftermath of the Christchurch massacre.
The Project host Waleed Aly referred to them in a widely-shared monologue on the show after the shootings last week.
The prime minister said he did not agree with what he put forward, saying whoever spoke to a journalist to "smear" him in that way in media reports eight years ago was lying.
Labor isn't buying the fresh explanation.
"I don't think anybody watching that thought that was credible," Senator Wong said.
Australian Associated Press