Prime Minister Scott Morrison on Wednesday unveiled a raft of sanctions against Russia after it recognised the separatist regions of Donetsk and Luhansk in Ukraine as independent territories.
"The invasion of Ukraine has effectively already begun. They're acting like thugs and bullies," he said.
"Australians always stand up to bullies and we will be standing up to Russia."
President Vladimir Putin signed a decree on the deployment of troops to the breakaway enclaves in eastern Ukraine in a move he said is aimed at keeping the peace.
The Russian embassy has responded at the new measures, accusing Australia of turning a blind eye to discrimination by "the radical nationalistic regime in Ukraine and to the plight of civilians in Donbass living for years under blockade and constant shelling from the Ukrainian military."
"In alignment with its key partners, Canberra has played its part in supporting and encouraging the xenophobic bullies based in Kyiv."
In a statement, the embassy said the decision to recognise the Donetsk and Luhansk regions on humanitarian grounds to "protect" civilians, including hundreds of thousands of Russian nationals.
"(Russia) will from now on guarantee the right of (Donetsk and Luhansk) residents to live in peace and preserve their language and cultural identity."
Mr Morrison completely rejected Russia's characterisation of the two territories it occupies.
"We have got a very large country in Russia which is bullying and threatening its neighbour and telling them the decisions that they have to make," he told the Seven Network.
"This is not how the world should work ... when you have a country that is bullying and seeking to use force and threats of violence to get its own way."
Foreign Minister Marise Payne said it was an "obscene perversion" for Russian President Vladimir Putin to speak of Russian soldiers acting as "peacekeepers" in Ukraine.
"Any suggestions that there is a legitimate basis for Russia's actions are pure propaganda and disinformation," Senator Payne told reporters during a visit to the Czech capital Prague.
She added Australia would not hesitate to impose more sanctions if Russia escalated tensions.
Overnight on Wednesday, Ukraine declared a state of emergency and told its citizens in Russia to leave while Russia began evacuating its embassy in Kyiv in the latest signs that a full-scale invasion could be imminent.
The head of the Ukrainian mission in Australia, Volodymyr Shalkivskyi, told the Nine Network on Thursday his country is on full alert.
"A full-scale invasion is possible. There is still the movement of Russian troops along our borders and, actually, build-up of those troops. We are getting ready," he said.
"There is still room for negotiations and we keep that door open."
Asked if he thought sanctions imposed by the United States - and others including Australia - would deter Mr Putin, Mr Shalkivskyi said, "You cannot use kind of normal logic when you consider the actions of Mr Putin".
"(Russia) has military superiority over Ukraine, it has nuclear weapons, at least, in their possession.
"But the consequences of full-scale invasion might be very dramatic for the entire world because, well, first of all, it's not going to be a one-day invasion. Ukraine will resist."
Mr Morrison spoke with his Ukrainian counterpart Denys Shmyhal on Wednesday night to inform him of the sanctions.
Mr Morrison told Mr Shmyhal that Russia's behaviour towards Ukraine was "unacceptable, unprovoked and unwarranted".
Australia has ruled out direct military assistance and is supporting Ukraine's cyber capability.
Russia's ambassador to Australia, Alexey Pavlovsky, was also hauled in to meet with the secretary of the Department of Foreign Affairs and Trade on Wednesday afternoon following the announcement of the sanctions.
The diplomat has not been expelled from the country.
with reporting from Reuters
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