Senator Watt said calls to shut the border were damaging, while lashing out at the coalition for causing hysteria and damaging Australia's agricultural reputation.
"We have absolutely no evidence at all that the virus is in Australia ... it does affect our international trade if people think that Australia has this disease," he told ABC radio on Monday.
However, Opposition Leader Peter Dutton said the government should close off travel from Indonesia in a bid to prevent cases.
"We should shut the border, but I think the prime minister needs to explain why that has not happened," he told Sydney radio station 2GB.
"But if the prime minister has a reason, if he's got some significant piece of intelligence that says that this is under control, and the coalition is not aware of that ... then I respect that."
Mr Dutton called on the government to properly explain the situation on its decision-making over foot and mouth disease prevention.
"(The prime minister) is, frankly, playing with a loaded gun here," Mr Dutton said.
"It's not just an impact on people ... who would lose their entire herd, but it would have a huge impact, $80 billion worth, on the economy."
Industry leaders have reported being questioned by export partners over whether or not the livestock disease was spreading in Australia, Senator Watt said.
"It's putting an extra workload on industry to ensure that correct information is being circulated to the world about the situation here," he said.
"It distracts attention from the fact that we are free of the disease and we have the strongest response Australia has ever imposed for a biosecurity threat."
The prime minister on Sunday defended the government's position to keep the border with Indonesia open as the country battles an outbreak.
A number of biosecurity measures have been rolled out to manage travellers from Indonesia, including shoe sanitation mats, information campaigns and increased passenger screening.
Opposition employment spokeswoman Michaelia Cash said the government was doing too little, too late, to help prevent outbreaks of the disease.
"Go to Western Australia at the moment, people are absolutely up in arms," she told reporters in Canberra.
"As an island nation, you have the ability to keep such disease out.
"What we are seeing under Murray Watt and Labor is a complete disregard for the potential economic impact, the devastation that could be reaped on Australia."
The agriculture minister has implemented powers under the Biosecurity Act for the first time in Australia, and flagged further measures would be announced this week.
