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Home Affairs Minister Peter Dutton said people evacuated from Wuhan, the Chinese city at the epicentre of the deadly coronavirus, would have access to medical treatment while under quarantine for up to 14 days.
Mr Dutton said the plan was also designed to keep the broader population safe.
"I can't clear a hospital in Sydney or Melbourne to accommodate 600 people. We don't have a facility otherwise that can take this number of people," he told the Nine Network on Thursday.
"I want to make sure that we keep Australians safe."
Mr Dutton said the plan was hatched in consultation with Australia's chief medical officer, who receives frequent advice from the World Health Organisation.
More than 600 Australian citizens in Wuhan have registered for advice or assistance.
Opposition Leader Anthony Albanese questioned the motivation for utilising Christmas Island.
"It's unclear whether that is motivated by a genuine belief that's the only option or embarrassment the government opened Christmas Island," he told ABC radio.
Foreign Affairs Minister Marise Payne said it was a very complex health crisis.
"In the process of working on the public health and protection of all Australians, we're also considering what we are able to do for those isolated in Wuhan," she said.
The minister sought to alleviate concerns of Australians stuck in Wuhan about the standard of the Christmas Island facilities.
"Appropriate care will most definitely be provided and I can assure all Australians of that, but families will make their own decisions."
New Zealand is working with Australia to evacuate refugees, but Kiwis will be allowed back into their country and quarantined.
Qantas has offered its aircraft for use in the evacuation.
The Australian government has confirmed those evacuated will have to contribute financially to the trip.
There are now more than 6000 cases of the respiratory illness and more than 130 deaths, mainly in Wuhan.