But he has distanced his comments from moves in Britain to seek out clerics who teach what authorities consider to be dangerous Islamic philosophy and forcing them to leave in the wake of the London terrorist bombings.
After Prime Minister John Howard met Muslim leaders in Canberra, Mr Costello repeated his view that Muslims who would prefer Islamic law to replace the laws set by the parliament were not welcome in Australia.
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“There might be other countries where the system of law is more acceptable to them,” he told ABC television.
But the treasurer backed away from the idea of deporting people.
Asked if he would compel such clerics to leave if there was a terrorist attack in Australia, he said: “Where a person has dual citizenship it might be possible to ask them to exercise that other citizenship.”
Mr Costello said it may be better for such people to leave Australia.
“If you can’t agree with parliamentary law, independent courts, democracy, and would prefer Sharia law and have the opportunity to go to another country which practices it, perhaps, then, that’s a better option,” he said.
“I’d be saying to clerics who are teaching that there are two laws governing people in Australia, one the Australian law and another the Islamic law, that that is false.
“There’s only one law in Australia – it’s the law that’s made by the parliament of Australia and enforced by our courts. There is no second law.”