Prime Minister Tony Abbott has awarded Australia's highest honour to the Queen's husband, Prince Philip.

The 93-year-old Duke of Edinburgh can now add Knight of the Order of Australia to his list of titles, a statement released by Mr Abbott's office early on Australia Day revealed.

Prince Philip will join retired Australian Defence Force chief Air Chief Marshal Angus Houston as the country's next knights, an honour that was reintroduced by Mr Abbott last year.

Mr Abbott said Prince Philip was being recognised for his contribution "to Australia throughout the Queen's 62-year reign".

"Prince Philip's long life of service and dedication should be honoured by Australia," the statement said.

"For three-quarters of a century, Prince Philip has served the Crown, and the wider Commonwealth.

"He served originally as an officer in the Royal Navy and then as a member of the royal family.

"He has served Australia with distinction and is patron of over 800 organisations."

Mr Abbott made special mention of the Duke of Edinburgh Award in Australia, which he said had positively influenced the lives of hundreds of thousands of young Australians.

Prince Philip joins his son, Prince Charles, who was made a Knight of the Order of Australia in 1981.

"It is fitting that we pay tribute to an extraordinary life of service," Mr Abbott said in the statement.

Opposition Leader Bill Shorten said Mr Houston was an "outstanding" person to receive high Australian honours.

But the Prime Minister was in a time warp awarding a knighthood to Prince Philip on a day Australians were talking about their national identity, he said.

"I just think people think it's an unusual priority," he told Fairfax Media radio station 3AW.

"It's outside the mainstream, I think, of Australian thinking to have done this."

Mr Shorten added that a Labor government would probably end the revived tradition of knights and dames.

"When we look at Australia in the 21^st century, it's about who we're going to be as a people," he said.

"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."

Labor backbencher Tim Watts asked if the move was a hoax.

"I'm at an Australia Day barbecue in Sunshine and talking to my constituents and letting them know that we just made Prince Philip a knight - and they laugh," he said.

"At first people think we're winding them up and it's a joke. It just shows Tony Abbott is on a different plane to most Australians."

Greens leader Christine Milne also mocked the decision.

"It's like a joke within a joke, that Australia has knighthoods, and that we're awarding one to a member of the British royal family," she said.

"As we saw with all nominees for Australian of the Year, there are plenty of wonderful people right here who are worthy of recognition, but this is Tony Abbott - stuck on what Australia was and failing to notice all that we are, or have any vision or pathway towards all that we can be."

The choice of Prince Philip as Australia's next knight was met with derision from some on social media immediately after the announcement was made.

Prince Philip an Australian knight. Geez,what a joke. — Dame Jennifer of Oz (@quotethon) January 25, 2015

Prince Philip: "Oh look, Lizzie. The colonies are giving me a knighthood! It's like they think they're people." [sips tea & shrugs, baffled] — Benjamin Law (@mrbenjaminlaw) January 25, 2015

Australia Day gets even more of an 18th Century feel with the appointment of new knights http://t.co/0DnYB1lRwC — Nick Bryant (@NickBryantNY) January 25, 2015

When he announced the return of knights and dames as Australia's top honours last March, Mr Abbott said the honour would be reserved for Australians whose contributions to national life were thrust upon them rather than sought.

Up to four knights or dames will be appointed in any year.

The first dame was the outgoing governor-general Quentin Bryce and the first knight was the incoming Governor-General Peter Cosgrove.

Professor David Flint, the national convener of Australians for Constitutional Monarchy, spoke in defence of Mr Abbott's decision on Monday.

"I think it's a worthy reward, he's had a very long connection with this country," Professor Flint said.

"We have a tradition of handing awards to people from other countries and I see nothing wrong with awarding it to a Greek who became an Englishman who worked very hard to keep us free in the Second World War and has made a major contribution to us without being paid anything."

The honours would have to have been signed off by Buckingham Palace under new arrangements brought in by Mr Abbott last year.

Fairfax Media last week asked Buckingham Palace if the Queen had recently signed off on any new knights or dames.

"Knights and dames in the Order of Australia are approved by the Queen on recommendation of the Prime Minister. We wouldn't comment further on the process," a palace spokeswoman said.