Australia's Prime Minister Tony Abbott has defended his decision to award a knighthood to Prince Philip, saying he has a long history of service in Australia.

The announcement that the Duke of Edinburgh would receive Australia's highest honour was made as Australians celebrated their national holiday.

It has drawn criticism from some politicians, including opposition leader Bill Shorten, who said the holiday is supposed to be about celebrating Australian identity.

"I think that on Australia Day - where we're talking about Australia, Australian identity - the government's managed to find a British royal to give a medal to, a knighthood to," he told Australia's Fairfax radio.

"I just think giving our top award to a British royal is anachronistic. To be honest it's a bit of a time warp. I wasn't quite sure it was serious until I realised it was."

But Mr Abbott said Prince Philip (93) has had a long life of duty and service to Australia.

"This honour recognises the contribution of the Duke of Edinburgh to Australia throughout the Queen's 62-year reign," he said.

"Prince Philip's long life of service and dedication should be honoured by Australia. For three quarters of a century, Prince Philip has served the Crown, and the wider Commonwealth."

Prince Charles was made a Knight of the Order of Australia in 1981.

Prince Philip last visited Australia in 2011, the year he turned 90, for a tour alongside Queen Elizabeth II.

Mr Abbott reintroduced knights and dames to the country's honours list in 2014, prompting ridicule from opposition Labour lawmakers who said it was proof the prime minister was "behind the times".