Australia is launching a criminal investigation into the Christmas Island shipwreck that killed at least 28 people, under people trafficking laws.
Prime Minister Julia Gillard said more bodies may be pulled from the sea after a boat carrying suspected asylum seekers crashed into jagged rocks.
She said the boat may have been carrying more than the 70 passengers originally thought.
Forty-two people were rescued from the heavy surf after the boat broke apart.
"We do not know with any certainty how many people there were on the boat so we've got to prepare ourselves for the likelihood that more bodies will be found and that there has been further loss of life than we know now with the numbers available to us," said Ms Gillard.
Immigration Minister Chris Bowen said as many as 100 people may have been on board - some 30 more than originally believed.
The passengers of the flimsy wooden boat are believed to have been asylum seekers making their way to Australia via Indonesia.
The route of the vessel and the identity of who organised the journey are still unclear.
In recent years increasing numbers of people from countries such as Sri Lanka, Iran, Iraq and Afghanistan have been making their way to Australia in boats organised by people smugglers.
"It is an evil trade," said Ms Gillard. "But I believe Australians are responding to these events today as human beings."
The policy of how to handle immigration remains a sensitive one in Australia and Ms Gillard called on the opposition to join a bipartisan inquiry into the tragedy.
Ms Gillard's Labor Party only won a second term in August after securing the support of the Greens and independents.
Both the Greens and independent MP Rob Oakeshott have again called for a softer line on asylum policy.
'Extreme conditions'Questions have been asked about how the boat managed to elude the Australian agencies charged with watching the country's sea approaches.
Christmas Island lies in the Indian Ocean about 2,600km (1,600 miles) from the Australian mainland, but only 300km south of Indonesia.
The boat approached the island early on Wednesday. The alarm was raised when residents heard the passengers' screams as heavy seas propelled the vessel onto the island's rocky shoreline.
Witnesses said the boat was smashed to pieces within an hour and survivors struggled to hang on to pieces of wreckage in the pounding surf.
It is believed the engine on the vessel failed, and island residents said the seas were the heaviest they had seen in months.
One resident, Simon Prince, told Associated Press: "The engine had failed. They were washing backward and forward very close to the cliffs here, which are jagged limestone cliffs, very nasty.
"When the boat hit the cliff there was a sickening crack. All the people on board rushed to the land side, which is the worst thing they could do."
Ms Gillard said the "extreme weather conditions" meant the boat was not detected "until seen from Christmas Island itself".
"In very rough and dangerous seas there is a limit to what can be achieved through radar and other surveillance mechanisms," she said.
Christmas Island is home to a detention centre housing nearly 3,000 asylum seekers who are waiting for their claims to be processed.
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