Foreign Minister Julie Bishop told Fairfax Media on Wednesday that rather than escalating hostilities, "we urge all parties to continue down the path of easing tensions and encouraging dialogue".

Ms Bishop said that Australia was "not a primary target but we have a deep interest in seeing this resolved".

"It's evident that it could ramp up into a more serious conflict," she said.

While she did not comment directly on Mr Trump's remarks, she was speaking after American media reported North Korea had made dramatic strides in its ability to threaten the US with nuclear missiles, prompting the President to vow "fire and fury like the world has never seen".

On Wednesday night, Mr Trump continued this rhetoric, writing on Twitter about the power of the US nuclear arsenal.

"My first order as President was to renovate and modernise our nuclear arsenal. It is now far stronger and more powerful than ever before," he said.

"Hopefully we will never have to use this power, but there will never be a time that we are not the most powerful nation in the world!"

Ms Bishop said Australia was "encouraged", however, by earlier remarks by US Secretary of State Rex Tillerson that the US was prepared to talk to North Korea, though she added that the regime of Kim Jong-un's persistent provocations made it "difficult to believe that North Korea has any real interest in peaceful dialogue".

US intelligence agencies have reportedly concluded that North Korea has successfully miniaturised a nuclear warhead able to be fit on a long-range missile that could reach the US or Australia. They have also concluded the regime has as many as 60 nuclear devices - more than previously thought.

Ms Bishop condemned North Korea's conduct as "dangerous, destabilising and illegal under international law".

Labor foreign affairs spokeswoman Penny Wong echoed Ms Bishop's remarks, saying the government was "right to urge all parties to continue down the path of easing tensions and encouraging dialogue".

"Like the government, Labor strongly condemns North Korean threats, and supports further appropriate steps to respond," she said.

Experts warned that North Korea's nuclear program appeared to be at a stage now where it was very difficult to stop. And while they did not believe conflict was likely to break out soon, they generally regarded Mr Trump's remarks as unhelpful and signalling a frustration that could provoke a miscalculation leading to conflict.

Mr Trump said that North Korea "best not make any more threats to the United States" or "they will be met with fire and fury like the world has never seen".

North Korea then said it was "carefully examining the operational plan for making an enveloping fire at the areas around Guam" where the US has a key military base.

Former defence minister and ambassador to Washington Kim Beazley said Mr Trump's remarks showed a "degree of his anxiety and concern" without necessarily an understanding of how they might be interpreted in Pyongyang.

He did not think Mr Trump would launch a pre-emptive strike but added: "You are very clearly getting a sense of his frustration and in that environment, things might happen by accident or design."

Mr Beazley said that although Mr Kim was regarded as rational, nobody was sure how he saw the world and therefore how he might calculate his response to perceived threats.

Australian Strategic Policy Institute executive director Peter Jennings branded Mr Trump's language "unhelpful".

"When you're in a crisis it's important that the President chooses his words very carefully and I don't think Trump is doing that.

"I don't think his comments are the end point of a carefully considered strategy and that's a risk because there's no knowing how the North will interpret what he says."

If he didn't follow through after drawing a "red line", it would damage his credibility, Mr Jennings added - a view also expressed by US leaders such as senator John McCain.

Lowy Institute international security director Euan Graham said the US and North Korea could likely continue to deter each other even as Pyongyang approached becoming a fully-fledged nuclear state. But he added he "wouldn't exclude the possibility that Trump might just lose patience with the whole process and order a military solution".

All experts agreed immediate conflict was unlikely. But Dr Graham said the "structural problem" was that unresolved reunification on the Korean peninsula would be a permanent threat to the tyrannical and poverty-stricken North, creating a longer-term "insidious risk" of war.

Rory Medcalf, head of the Australian National University's National Security College, tweeted that "President Trump's fire and fury North Korea remarks [are] causing real worry among allies like Australia.

"Hard to see how this can end well," he wrote. "By descending to Pyongyang-style rhetoric without good options for following through, Trump risks US credibility with allies and foes."