Some states - but not all - already allow schools to discriminate on the basis of sexual orientation, gender identity or relationship status.

Commonwealth laws also contain some provisions to permit faith-based schools to exercise this discretion.

A long-awaited report into religious freedoms has reportedly recommended the right be enshrined in the federal Sex Discrimination Act to ensure a consistent national approach.

The review's panel, chaired by former Liberal minister Phillip Ruddock, said it accepted the right of schools to select or preference students who uphold their religious convictions.

However, Prime Minister Scott Morrison played down the proposal on Wednesday, saying such exemptions to anti-discrimination laws already exist.

"We're not proposing to change that law to take away that existing arrangement," he told reporters on the NSW Central Coast.

Opposition Leader Bill Shorten says he can't believe the prime minister hasn't ruled out the "silly" idea.

"The fact is every child is entitled to human dignity. We shouldn't even be having this debate," Shorten told reporters in Melbourne, demanding the government release the report.

Special Minister of State Alex Hawke strongly supports the proposal, saying it is up to individual Christian schools to negotiate their handling of gay students.

"I don't think it's controversial in Australia that people expect religious schools to teach the practice of their faith and their religion," he told Sky News.

Hawke says people of faith in Australia are under attack.

"It's a constant pressure from the left of society on people of faith."

Treasurer Josh Frydenberg said concerns about discrimination against children were jumping the gun, insisting the government would "get the balance right" and leave existing laws untouched.

Liberal candidate for Wentworth Dave Sharma, appearing alongside the treasurer in Sydney on Wednesday, said he was personally opposed to any new laws which discriminated on the basis of gender or sexual orientation.

The review was commissioned after the 2017 national same-sex marriage vote and handed to the government several months ago, but is yet to be released.

Social Services Minister Paul Fletcher said he and his cabinet colleagues had not seen the document.

AAP