At present, religious bodies and schools are exempt from the Equal Opportunity Act, allowing them to choose teachers based on faith.

The act is being reviewed by the all-party Scrutiny of Acts and Regulations Committee (SARC).

Reverend David Devine, of Rowville Baptist Church, fears that removing exemptions from legislation could threaten the ability of faith-based schools to retain their distinctiveness.

"We see that we have a distinctive quality, be it education or some form of community care, that flows out of our faith.

"By threatening that distinctiveness, you undermine that diversity. I think it has the potential to be a bit bland, to be honest."

Mr Devine said teaching in religious schools was not just about the content but about the "example of the teacher". "Students don't only see them as their maths teacher but as an adult who exemplifies certain things for them."

In a review of the Equal Opportunity Act conducted last year, the Victorian Equal Opportunity and Human Rights Commission recommended the legislation be changed from allowing an exemption where it was "necessary" to comply with a religious doctrine to being "reasonably necessary".

"While it is acknowledged that actions taken to conform with religious doctrines are important and protected by the freedom of religion, these must be balanced against competing rights in the circumstances," the commission's submission stated.

Liberal MP Nick Wakeling said there were some concerns among community groups that exemptions could be removed. "We don't have a society where people are forced to be educated by Catholic schools - we have a choice.

"That's been fundamental in our society. But people who decide to send their children to a non-government school do so knowing that as part of the education process the people that will be teaching them will share common values with the school."

Government spokesman Chris Owner said the State Government, which had asked SARC to look at the exceptions and exemptions contained within the Equal Opportunity Act, would consider the options outlined by the committee.

He said no decision had been made on issues such as religious exemptions.