The federal government has agreed to an inquiry into Australia's media but does not see any merit in looking at the concentration of ownership.

Talks are under way between Labor and the Greens to finalise the terms of reference for the inquiry, with an announcement expected later in the week.

Communications Minister Stephen Conroy told the Labor caucus on Tuesday the government supported an inquiry but saw no merit in looking at the concentration of media ownership, or in setting up a forum for MPs to complain about the coverage of politics.

Labor MP John Murphy, who has publicly campaigned for an inquiry, told the meeting he believed Rupert Murdoch's News Limited, which has the lion's share of the market, should be broken up, saying it has put too much power in too few hands.

Another MP said the UK and US were better served by a greater diversity of media when it came to political coverage, and that Australia's lack of diversity had "implications for democracy".