Under current law, faith-based organisations, including schools and hospitals, can refuse to hire those they view as sinners if they consider it ''is necessary to avoid injury to the religious sensitivities of adherents of that religion''.

Ms Gillard has met Australian Christian Lobby managing director Jim Wallace several times, and he says she assured him ''she has no intention of restricting freedom of religion'' when it comes to religious groups' legal rights to discriminate in hiring and firing.

The Prime Minister said through a spokesman: "We don't comment on discussions with stakeholders.''

Discrimination by religious organisations affects thousands of Australians. The faiths are big employers, and the Catholic Church in particular is one of Australia's largest private employers.

They rely on government funding but because of their religious status are allowed to vet the sexual practices of potential employees in ways that would be illegal for non-religious organisations.