Communications Minister Malcolm Turnbull says film and music companies, not internet users, should foot the bill for any scheme cracking down on online piracy.
Mr Turnbull also says companies arguing for tough anti-piracy measures will have to justify why Australians pay more to download movies and music, and why they have to wait longer to access it, than overseas consumers.
But Mr Turnbull said governments could not ignore the issue of illegal downloading because of the dangers it posed to the viability of the creative sector.
Mr Turnbull and Attorney-General George Brandis on Wednesday released a discussion paper on online copyright infringement containing proposals to tackle illegal downloading.
The paper includes proposals to block overseas websites that host pirated content and to compel internet service providers (ISPs) to stop users illegally downloading movies, television shows and music.
"I am a passionate defender of the internet and freedom of the internet but freedom of the internet doesn't mean freedom to steal," Mr Turnbull told ABC radio.
"The fundamental problem we've got is that internet piracy is a big issue – there are billions of dollars globally being stolen."
Mr Turnbull said an Australian anti-piracy scheme could be modelled on New Zealand's. There, internet service providers (ISPs) are required to send customers a desist notice when rights owners inform them of illegally downloading. After three notices, the rights owner can take the customer to court.
"There are some people in the content industry who believe that the costs should be borne in whole or part by the telecommunications sector – by the ISPs," he said. "I don't find that a persuasive argument."
Mr Turnbull said government had a role but that rights holders had the most power to discourage online piracy by making their content available quickly and cheaply.
Australians pay 50 per cent more than US consumers on iTunes for the Top 50 songs according to consumer group CHOICE.
"We're never going to eliminate piracy, like you'll never eliminate theft,'' he said.
''I think we can drastically reduce it, but everyone has to play their part.
"The content owners in the debate that's going to follow this discussion paper have got to justify why they charge more to Australians, why they are not releasing content in Australia at precisely the same time as it's released in the United States or anywhere else in the world."
Mr Turnbull was a founding director of ISP Ozemail before entering politics.
He said he stood by his view that the High Court was correct to find internet service provider iiNet had not authorised its customers' illegal downloading in a landmark 2012 case.