Homeopathy does not improve people's health, scientists say.
And health funds should reconsider offering rebates for homoeopathic therapies, the nation's peak medical research body says.
Debate: Is homeopathy a sham?
After reviewing 1800 studies on the health effects of homeopathy, National Health and Medical Research Council scientists say there is no reliable evidence to back its effectiveness.
"There is no good quality evidence to support the claim that homeopathy works better than a placebo," the NHMRC report said.
The report said homeopathy should not be used to treat health conditions that are serious or could become serious.
Homeopathy is based on the idea that the body's own healing response to disease can be stimulated by using specially prepared, highly diluted substances.
A World Health Organisation review in 2009 estimated Australians spend US$7.3 million a year on homeopathic medicines.
Paul Glasziou, chair of the NHMRC homeopathy working committee, said health funds should not offer rebates for homoeopathic therapies.
"In the current financial constraints, I would think that health insurers ... should be looking at what is effective versus ineffective treatments," says Prof Glasziou.
"Things that haven't been shown to be effective, I wouldn't want to see those funded either public or privately."
Only 225 of the 1800 studies met the criteria to be included in the NHMRC's examination of homeopathy.
Studies were only included if they compared a group of people who were given homeopathic treatment with a similar group who did not receive treatment.
The Australian Homeopathic Association said it was in the process of preparing a formal response to the NHMRC report.