Among recommendations from the nation's special envoy against anti-Semitism, Jillian Segal, is to adopt a definition of hatred toward Jews from the International Holocaust Remembrance Alliance.
In a report handed down on Thursday, Ms Segal also called for the defunding of universities and cultural institutions found to have enabled or failed to stop anti-Semitism.
But Labor MP Ed Husic, the first Muslim elected to federal parliament and first of his faith made a minister in the Australian government, said he would prefer not having to use "sticks and threats of funding".
"I would much prefer us finding ways to bring people together rather than being heavy-handed in response," he told ABC Radio on Wednesday.
Education Minister Jason Clare said the government will wait for a report due in August from the Special Envoy to Combat Islamophobia Aftab Malik, to consider his recommendations together with Ms Segal's.
Asked if he supported the call to axe university funding, Mr Clare said he would not comment on the recommendations.
Ms Segal's report also said Australia was on a "dangerous trajectory where young people raised on a diet of disinformation and misinformation about Jews today risk becoming fully-fledged anti-Semites tomorrow".
Mr Husic is concerned that finding ran the risk of being "too sweeping".
"That's a statement ... we've got to be careful about taking that as an evident truth," he said.
"Younger Australians, like most Australians, are genuinely moved by what they're seeing in the Middle East, and it shouldn't necessarily be assumed or a conclusion drawn that that will lead to anti-Semitism, so that's important to be mindful of."
On the definition of anti-Semitism suggested by Ms Segal, Mr Husic raised the issue of free speech.
"The issue of definition instantly brings into question whether or not people will be able to raise their concerns about the actions, for example, of what the Netanyahu government is doing in Gaza, and how that would be treated under a definition," he said.
The lead drafter of the definition of anti-Semitism, US lawyer Kenneth Stern, has previously expressed concerns it could be used to suppress free speech.
Liberal senator James Paterson has previously voiced his opposition to the definition being legislated in Australia, or there being consequences for those found to have breached it, on freedom-of-speech grounds.
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