Seven out of eight states and territories want domestic borders down by December as part of a new 'road map' to recovery from coronavirus restrictions.
But Western Australia, which has had no community transmission for 146 days, has refused to take part.
The prime minister and seven leaders agreed on the plan to reunite the country at a national cabinet meeting today.
Scott Morrison said he felt like Australia could break apart due to border closures
The idea is to use a 'hotspot' model where state borders are open to everywhere except certain designated areas which have high rates of community transmission.
'There will be further discussion on how that can be more specifically defined,' Scott Morrison said.
'This will take some time to get that right.'
Mr Morrison wants New Zealand to be included in the hotspot model by Christmas, allowing for international travel for the first time since March.
New South Wales Premier Gladys Berejiklian said she wants travel with New Zealand 'as soon as possible'.
Mr Morrison said he wants a 'sustainable set of arrangements where Australians could move around, using a hot spot model by Christmas.'
'And whether that's achieved in Western Australia or not, well, that will be up to Western Australia'.
WA Premier Mark McGowan has flat-out refused to open his borders to any jurisdiction, even Tasmania which has not had a single Covid case since 15 May.
The tourism industry is terrified that Mr McGowan, who in one poll recorded a 91 per cent approval rating, will keep the border shut until after the state election on 13 March because borders closures are so popular.
In August, he alluded to this timeframe, saying: 'As to whether it's before the end of the year, as to whether it's before the middle of next year, I cannot put a date on it.'
Mr McGowan explained his decision in a press conference today, saying: 'I made it clear that Western Australia will not be agreeing to a hot spot model or a hot spot definition which replaces our successful border controls.
'Western Australia has always avoided setting an arbitrary deadline on borders. A date will be set when our health advice recommends it, but that might be some time away.
Passengers queuing to check in for flights to Queensland at Sydney Domestic Airport in July
He added: 'The Prime Minister and other states respect and understand our decision given the unique factors for Western Australia and the very positive direction our economy is heading.
'Unlike the rest of the country, WA is not currently in a recession. If we went too soon it could be deadly, and there would be economic devastation.'
He also said: 'WA does not have border communities so we don't face the associated social disruption seen on the eastern coast.
Victoria: Completely open, but other states are banning residents from going there
NSW: Border with Victoria is closed but others are open without restriction
Queensland: Open to everywhere but Victoria, NSW, and the ACT
Northern Territory: Open to everywhere but Victoria and Sydney, which must do hotel quarantine
South Australia: Closed to Victoria, NSW arrivals must self-isolate, rest are open
Tasmania: Closed to Victoria, everywhere else must do hotel quarantine
Western Australia: Closed to everywhere without an exemption
'Our position is eminently sensible. It's just eminently sensible,' Mr McGowan said.
'If the virus came in, if we brought our border down, adopted some alternative regime that was less effective, which it would be, and virus came in via some FIFO worker out of Melbourne, infected a major mining company and then huge numbers of the mines had to close - as has happened in Brazil - it would be catastrophic for the rest of the country, and for Western Australia.'
Western Australia has one tenth of the nation's population but accounts for half of