Australia's prime minister has been accused of dismantling democracy after he vowed to ban environmental groups from campaigning for boycotts of businesses that collaborate with the fossil fuel industry.

Scott Morrison told a resources industry conference in Brisbane, Queensland, that his government was developing legislation to outlaw the “indulgent and selfish practices” of protest groups who targetted resources projects.

"We must protect our economy from this great threat," he said.

Climate change activists have applied pressure to banks to not finance the controversial Adani coal project in Queensland, and have targetted other companies supplying goods and services to the proposed mine.

Mr Morrison made it clear the new legislation would punish consumer activists - and other protesters - rather than penalise companies who respond to their campaigns.

Adam Bandt, a Greens Federal MP, said the proposed ban demonstrates that the government "is a direct threat to free speech and democracy".