Immigration Minister Peter Dutton says an asylum-seeker baby being treated in a Queensland hospital will be released into community detention and not immediately transferred to Nauru.
Doctors at Brisbane's Lady Cilento Children's Hospital have refused to release one-year-old baby Asha until an acceptable home is identified.
The stand-off prompted a week of rallies outside the hospital by asylum-seeker advocates.
The Australian Medical Association has issued the government with a set of demands, calling for the immediate removal of all children from detention.
Baby Asha has been receiving treatment at Brisbane's Lady Cilento Children's Hospital after suffering burns from boiling water while in detention on Nauru.
Doctors at the hospital had refused to release the one-year-old until an acceptable home had been identified.
Her plight sparked a vigil and protests that have run outside the hospital since last week.
Immigration Minister Peter Dutton says the doctors have now agreed to release the child.
Mr Dutton says the government has proposed to move baby Asha and her family into community detention here in Australia from where she will continue to be processed.
"So we are proposing that baby Asha will come from Lady Cilento and will go into community detention as have 83 others who are living in the community who are in Australia for medical assistance and their family members who are here to support those for medical assistance. It will be a continuation of that policy."
Mr Dutton says the baby and her parents will be returned to Nauru once their medical and legal matters are finalised.
"The Government's position is perfectly clear. That is, at some point, if people don't have a protection claim, they will be returned to the country of origin or back to Nauru. We are not going to reneg on that position. We have a very important policy to continue. That's stopping the boats, making sure we deal with cases compassionately but if people are suggesting to you that somehow there has been a change in the policy or that we're going to allow special treatment in baby Asha's case, then that is not the case."
The President of the Australian Medical Association, Professor Brian Owler, has called for the immediate release of all children in detention and a moratorium on any child being sent back to detention centres.
Professor Owler says keeping children in detention has significant health impacts.
"We know from the Human Rights Commission that there is no doubt that having children in detention is harmful. It causes physical, psychological, emotional and developmental harms. The only way to countenance there is to have children out of detention."
The A-M-A has also called for the establishment of a transparent, national statutory body of independent clinical experts, with the power to investigate and report to the parliament on the health and welfare of asylum seekers and refugees.
Speaking at a rally in Sydney, Professor Owler warned the forced removal of baby Asha would represent a point of no return in the asylum-seeker debate.
He says doctors at the Queensland hospital who earlier refused to release the baby acted appropriately.
"We unequivocally support the doctors and nurses working in Lady Cilento. It is an absolute ethical obligation, not to mention moral obligation, of those doctors and nurses to not release baby Asha into a situation where they believe there is likely to be harm."
Protesters pledged to maintain a 24-hour vigil outside the Brisbane hospital where baby Asha is being treated until they received further information about the family's situation.
The Asylum Seeker Resource Centre's Kon Karapanagiotidis has thanked the crowd for their support.
"Thank you again so much for sending a clear message that we are not going to stand by and allow children to be abused, we are not going to stand by and allow women and men or children to be sent to harm. We are Australians, we're not going to stand for this, we're not going to put up with this ever again."
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