Gillard on Tuesday defended leaving the dead bodies at sea following criticism that more would have been done had they been Australians.
An extensive three-day air and sea search for an asylum-seeker boat, which is presumed to have capsized near Christmas Island with at least 55 people on board last week, failed to find any survivors.
Up to 13 bodies were spotted in the water, along with debris and life-jackets, but they were not recovered while the hunt for survivors was on, with customs officials saying on Monday they were now too busy rescuing other boats.
"That is a very tough decision but it is an operational decision," Gillard told reporters.
"As border command has made clear, they always put the highest priority on saving lives and I think we would all understand why that's got to come first in any tasking or any work that border command does."
Australia's Tamil community criticised the move, saying there would be anger if the bodies of Australian victims were left in the remote waters off the Indian Ocean territory of Christmas Island.
"If they were Australians I am sure that I would be angry," Bala Vigneswaran, executive officer of the Australian Tamil Congress, told the ABC.
"I'm sure that everybody here in Australia would be very disappointed and I don't think we would have treated Australians like this."
'Dreadful tragedy'
Asked about this criticism, Gillard said Australia would "always put the highest priority on saving lives".
The doomed vessel was one of several arriving over the past week, with seven boats carrying a total of about 500 people intercepted since Wednesday, including one carrying more than 90 people which sought assistance near Christmas Island.
"We have seen yet another dreadful tragedy, considerable loss of life," Gillard said of the latest sinking.
"I think it breaks everybody's heart to see that loss of life, which is why we send the message very clearly; do not risk your life, do not risk your children's lives, do not get on a boat."
Hundreds of asylum-seekers, many fleeing Afghanistan, Iran, Iraq and Sri Lanka, have drowned en route to Australia in recent years. The boats they take from transit hubs in places such as Indonesia are often overcrowded and unseaworthy. – AFP