Australians have a right to be bigots, Attorney-General George Brandis has told parliament.
During the 2013 election campaign the coalition promised to introduce to parliament a bill to repeal section 18C of the Racial Discrimination Act.
While the repeal would not affect state laws against racial vilification, the coalition wants the Act rewritten so that it does not impede freedom of speech.
It follows the case of newspaper columnist Andrew Bolt, who lost an action in the courts in 2011 defending a column he wrote claiming that some Aboriginal people sought professional advantage through the colour of their skin.
"People do have a right to be bigots you know," Senator Brandis told parliament on Monday.
"In a free country people do have rights to say things that other people find offensive or insulting or bigoted."
Prime Minister Tony Abbott told parliament it was the nature of free speech that sometimes people would not like what was written or said.
The government was determined to ensure that Australia remained a free and fair and tolerant society where bigotry and racism had no place.
But it also wanted it to be a nation where freedom of speech was enjoyed.
"And sometimes free speech will be speech which upsets people, which offends people."
The government is still consulting on the repeal bill but Senator Brandis said it would be introduced mid-year.
Shadow attorney-general Mark Dreyfus said the government was giving the green light to racist hate speech.
Labor was deeply concerned by the scope of changes the government is planning to Section 18C.
The laws had served Australia well for almost 20 years and should not be watered down, Mr Dreyfus said.