Mr Abbott said the apparent execution of the 31-year-old freelance journalist, who disappeared in Syria in 2013, "just demonstrates that we are dealing with pure evil".

"This is a hideous movement that not only does evil, it revels in evil," Mr Abbott said in Canberra on Wednesday.

"It exalts in evil and it abundantly justifies what Australia and other countries are doing to assist people who are threatened by this murderous rage to protect people who are at risk from this murderous rage."

Mr Abbott has come under fire from the Greens for committing Australian military to assist in air drops of equipment to Kurdish fighters battling the Islamic State, also known as ISIL, in northern Iraq.

The Greens have accused the Prime Minister of not being transparent about the extent of Australia's engagement, and questioned whether Australian soldiers should be deployed to deliver arms and ammunitions when there has not been a United Nations resolution for such action.

Mr Abbott has repeatedly said there has been no request from US President Barack Obama for Australian troops to be deployed on the ground in Iraq.

He said President Obama had responded with a "mix of reason and appropriate anger" to the "repellent, abhorrent" actions of Islamic State militants.

"Many countries are talking to one another about what is the best way forward here," he said.

"But plainly ISIL is a threat not just to the people of the Middle East but to the wider world.

"This is a conflict which we understandably wish to avoid but it is a conflict which, sadly, is reaching out to us as we have seen, with the presence of some 60 Australians fighting with terrorist groups in this part of the world."

Foreign Minister Julie Bishop said "assuming that the image is authentic it represents a heinous crime".

"It's a despicable act, grotesque and underscores the kind of people we are facing here in Iraq and Syria.

"The imagery of the beheading of journalists is shocking and I don't believe anyone can see that without feeling deeply for the family and deeply concerned about the nature of this barbaric organisation that we're confronting."

"The situation in Iraq is extremely dangerous and volatile."

Labor Leader Bill Shorten described the video as "medieval".

"I think Australians genuinely find it hard to even understand what would motivate such violence to commit such an atrocity on an innocent soul," Mr Shorten said.

"In terms of the reasons why this happened, it is not because of western involvement as these Islamic fundamentalist terrorists would have you believe.

"It's because they follow a wicked ideology of extremism."

Mr Shorten added that he was disappointed that domestic politics was intruding on discussions about Australia's humanitarian involvement in Iraq.

He said the opposition was supportive of strong action to defend national security.

"I think it would be well behoved of Liberal and Labor people and indeed other members of the Parliament to focus on what's important," Mr Shorten said.

"Not trying to chip points domestically."

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