The titles were reinstated in March 2014 by former Prime Minister Tony Abbott, who was widely criticized for awarding a knighthood to Prince Philip, and for being was out of touch with public attitudes.
The Cabinet has now decided to remove the titles from the Awards, with the support of the Queen. Prime Minister Malcolm Turnbull says such titles are anachronistic.
There have been just five knights and dames appointed since Tony Abbott reintroduced the titles: Dame Quenton Brice, Sir Peter Cosgrove, Dame Marie Bashir, Sir Angus Houston, and - infamously - the Queen's husband, Prince Philip. Their titles will not be affected by the cabinet decision to remove the titles from the Awards from the Order of Australia.
Mr Turnbull says the titles of knights and dames are no longer appropriate in a modern Australian honours system.
"It is a long way from being the most important issue in Australia today. But it is a change as you know, removing knights and dames from the Australian honour system is a decision the Cabinet has taken. Her Majesty's agreed to amend the Letters Patent, which is essentially the rules of the Order of Australia. This reflects modern Australia. Knights and dames are titles that are really anachronistic, out of date, not appropriate, in 2015, in Australia."
The Labor Party has welcomed the federal government's announcement, frontbencher Chris Bowen saying the reinstatement of the titles was a national disgrace.
"They never should have been brought back. It was a farce, a joke, a national disgrace .... Of course we are glad that this rolling farce has been corrected. With all due respect to Angus Houston and Quinten Bryce and the other fine Australians who have received them, it is not appropriate in modern day Australia, in 2015 that we are clinging on to the vestiges of imperial Britain through our honours system and we shouldn't be celebrating the fact that knights and dames are gone, we should be lamenting the fact that they came back under this Government."
There was a similar sentiment from the Greens' senator Adam Bandt.
"I welcome the fact the liberal party have entered the 21st century. It's where most Australians have been for a while."
Author Tom Keneally is a strong advocate of Australia becoming a republic. He's welcomed the scrapping of the titles, and hopes it is another step towards Australia finding its own place in the world.
"It seemed that even conservatives were outraged by the idea and that surprised me greatly. I wouldn't say it's a matter of republican sentiment growing, but more a matter of our destiny having less to do with that of Britain."
He says while the republican movement welcomes the removal of the titles from the Order of Australia Awards, they actually gained support after the knighthood was bestowed on Prince Philip.
"Peter Fitzsimons from the Republican Movement tells me that they increased their membership threefold due to Tony (Abbott's) knighting of Prince Philip. So we live in hope that one day the republican movement will respectfully and without rancour go all the way. And the fact that we were well along that track, which I think was indicated by the reaction to these knighthoods and the fact they have now been scrapped."
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