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. Speaking to reporters outside Parliament House on Wednesday, Mr Wallace said that he was ''not aware of any church or any organisation actually rejecting the employment of anyone and particularly, not the provision of services''. Asked whether religious organisations should retain their legal right not to hire homosexuals or others whose lifestyles are deemed contrary to religious values, Mr Wallace said it was ''not a case of vetting people''.

''I don't think anybody goes through and vets anybody, it's a case of looking for people in employment of staff who represent your same philosophy of the organisation that's employing them. ''I've got to tell you, there's not too many environmental groups that employ someone who's an ardent logger, for instance.'' Attorney-General Nicola Roxon said on Wednesday that exemptions for religious bodies in relation to employment have been in place for many years and will continue under Labor's proposal. ''As we've made very clear over the past two years, we committed to simplify and consolidate the law, not completely re-invent the anti-discrimination system,'' Ms Roxon said. However, she said the legislation also introduced significant positive steps to combat discrimination on the basis of sexuality.

''Labor is proud to have developed the sex, race and disability discrimination acts and established the Human Rights Commission. ''And we are proud now to be developing these important new protections from discrimination on the basis of sexuality . . . The fact that these new protections are being glossed over by some commentators is regretful.'' Finance Minister Penny Wong, who will be steering the Human Rights and Anti-Discrimination Bill through the Senate, is a committed Christian and a lesbian. Senator Wong said this week that Labor was ''seeking to balance the existing law and the practice of religious exemptions with the principle of non-discrimination''. It is believed that senior Labor ministers have been making similar promises to the Christian lobby since Kevin Rudd was prime minister.

Before she was elected in 2010, Ms Gillard promised Mr Wallace in a filmed interview that she would protect the school chaplains program and that under her government ''marriage will be defined as it is in our current Marriage Act as between a man and a woman''. She said that ''we do not want to see the development of ceremonies that mimic marriage ceremonies''. The independent member for Sydney in the NSW state government, Alex Greenwich, is urging the Prime Minister to reject anti-discrimination legislation that he says allows ''publically funded religious service providers free-range to discriminate against groups including gay and lesbian Australians''. ''The Prime Minister has a duty to protect those affected by discrimination, not those practising it,'' said Mr Greenwich, who is well known for advocating gay rights. Mr Greenwich is writing to Julia Gillard while a Senate committee reviews the draft Human Rights and Anti-Discrimination Bill, which consolidates the five existing Commonwealth anti-discrimination acts into a single comprehensive law.

"By allowing hospitals and schools to practice discrimination the Prime Minister is supporting breeding grounds for homophobia,'' he said. "Such discrimination constributes to serious financial hardship, health, mental health impacts of those affected". The Australian Catholic Bishops Conference is adamant that the church should retain its rights to discriminate, but Anglicans are divided. The more conservative Sydney diocese claims its right to discriminate against gays and lesbians and others whose ''lifestyles'' offend religious beliefs, Bishop Robert Forsyth of South Sydney said. But social welfare charity Anglicare practises the opposite, South Australian branch chief executive, the Reverend Peter Sandeman said.

''Jesus didn't discriminate in who he associated with and helped and neither should we,'' Mr Sandeman said. "At Anglicare South Australia, we introduced a formal policy welcoming and supporting inclusion and diversity nearly a decade ago.'' Jews ''don't have a position on this'', Executive Council of Australian Jewry executive director Peter Wertheim said. The Australian Federation of Islamic Councils did not respond to questions. Labor's Human Rights and Anti-Discrimination Bill was an attempt to consolidate the law, ''not completely re-invent the anti-discrimination system'', a spokeswoman for Attorney-General Nicola Roxon said. ''We are proud to be introducing important new protections from sexual orientation discrimination. While there are some exemptions, this doesn't detract from these important changes''.