Assange, subject to an international arrest warrant for rape claims in Sweden as the storm rages over his online release of some 250 000 US diplomatic cables, was born in and holds a passport for Australia.
Attorney general Robert McClelland said the Australian government had considered cancelling the passport as global efforts continue to track down Assange but there were "issues in respect of serving a notice of cancellation".
"More importantly, there (are) issues as to whether it would be constructive or counter-productive to the law enforcement," McClelland told reporters.
Assange's passport would set off alarms if presented at an airport and McClelland questioned "whether it would be counter-productive to remove the identification that would in fact trigger the law-enforcement process".
The attorney general said Australia was also examining whether Assange had broken any local laws and had indicated "that we will provide every assistance to United States law enforcement authorities".
Asked if Assange would be welcome to return to Australia McClelland said: "Any Australian citizen has their rights as an Australian citizen but that also includes the consequences of breaching any laws of another country.
"I’m aware the US attorney has said that US law enforcement authorities are looking very closely at the fact that United States laws may have been breached," he added.
Australian Prime Minister Julia Gillard on Thursday rounded on Assange's actions as "grossly irresponsible" and illegal, as his mother expressed grave fears for her son's safety.
Assange, believed to be hiding out in Britain, briefly broke cover on Saturday to say he had boosted his security after receiving death threats.
His whistleblowing website was forced to turn to Switzerland for a new domain name after its original wikileaks.org address was shut down by an American provider, while Paris tried to ban French servers from hosting it.