An equality campaigner has called Prime Minister Anthony Albanese "gutless" for abandoning plans to scrap the exemption that allows faith-based schools to discriminate against staff and students on the basis of their gender or sexuality.

James Elliot-Watson — who said he was punished by his Christian school for being gay — said he is incensed by Mr Albanese's decision not to proceed with the contentious reform, warning that it will lead to more young LGBTQ+ people being harmed. 

Labor went to the last election promising to introduce a religious discrimination act to increase protections for people of faith while also ensuring that LGBTQ+ people aren't discriminated against in schools.

But last week Mr Albanese said the window to introduce the suite of contentious legislation had passed after previously ruling out proceeding without bipartisan support, dismaying LGBTQ+ and faith groups that have spent years calling for the issue to be resolved.

"If there's something you need to get right, it's this, and he's just walked away from it," Mr Elliot-Watson said. 

"There's no other way to describe it, it's gutless."

The advocate, who is now 29, said he was barred from becoming a prefect by his Christian school after he confided in a teacher that he was "struggling with his sexuality". When he later came out during class, he said he was suspended.

Since then, he said he's spent "thousands of dollars and hundreds of hours in therapy" trying to overcome those experiences. 

"For me, it's clear cut, black and white — you either do something or you don't," said Mr Elliot-Watson, who has campaigned alongside Equality Australia for the reform.

"It's my life we're talking about here."

Religious discrimination protections shelved

The issue of religious discrimination protections has plagued both sides of government after it was first floated in the wake of 2017's successful same-sex marriage plebiscite.

In shelving the draft legislation, Mr Albanese is seeking to avoid another divisive debate with an election on the horizon and at a time of already simmering community tensions.

"The last thing that Australia needs is any divisive debate relating to religion and people's faith," he told reporters on Friday.

"I don't intend to engage in a partisan debate when it comes to religious discrimination."

He blamed the Coalition for the failure to reach an agreement, stating they had not suggested any amendments to the draft legislation, which has not been made public.

LGBTQ+ advocacy group Equality Australia this week accused the government of breaking an election promise and said the decision would result in more children being refused enrolment and denied leadership opportunities and more teachers losing their jobs at faith-based schools.

"While many more live with the constant fear that someone will finally discover who they are," Equality Australia chief executive Anna Brown said.

"The government is playing a dangerous game by not acting now and pursuing the available pathway through parliament when the stakes are so high for thousands of vulnerable Australians," she said.

Faith groups also disappointed

Melbourne Archbishop Peter Comensoli, who has been part of discussions with the government and opposition about the legislation, also said it was regrettable that the plans would not proceed.

In a statement, he called on the prime minister to ensure that "protections for people of faith will not go backwards".

"In the absence of any new protections, today's announcement should also mean that existing protections remain in place," he said.

Christian Schools Australia were also dismayed, stating that it was too soon to give up on the "historic opportunity" to enact the "long overdue protections".