Australian Prime Minister Malcolm Turnbull is expected to ask state and territory leaders to hand over citizen licence details at a special national security summit in Canberra on Thursday.
The prime minister told ABC radio on Wednesday that adding driver's licences to the federal government's database of passport and immigration information will allow authorities to more quickly identify people suspected of or involved in terrorist activities.
The technology could be used, for example, in surveillance at airports and shopping malls.
"It's simply a question of using technology and being proactive -- not being complacent," he said.
"We believe if we bring together driver's licences, then we can start to build up a national system that will enable us then more quickly to identify people, particularly to be able to identify people that are suspected of, or involved in terrorist activities.
"About half of the population have got a photograph in a federal government system of one kind or another."
Turnbull acknowledged there was a risk that such big and complex data could be compromised but said steps will be taken to ensure it is protected.
"You can't allow the risk of hacking to prevent you from doing everything you can to keep Australians safe," he added.
"All of the big databases are protected against hacking. We are determined to keep Australians safe. And we must use every technology we can to do that.
"The alternative is to not use data at all."
The prime minister said the focus is to constantly improve the government's cybersecurity capabilities.
Also speaking with the ABC, Minister for Justice and Minister Assisting the Prime Minister for Counter Terrorism Michael Keenan said it is about giving police technology that they need to do their job properly.
"Now currently, when they have to identify people through their face ... it can take over a week to get the information they need. We're doing it in a 1950s way, essentially, when we should be doing it in a 21st century way," Keenan said.
"So what we have developed is a new system that will allow that to happen instantly."
Last month, Australia's Foreign Minister Julie Bishop told a high-powered panel at the United Nations that Australia is keen to work with communications companies to crack encrypted messages used by terrorists.
While Australia supports an open, free, and secure internet, Bishop said encrypted messaging apps used by extremist groups are in the Australian government's sights.
"Australia is very keen to work constructively with communications service providers to prevent terrorists from using encryption to hide online," Bishop said.
"This is a significant challenge as encryption is vital for the protection of many legitimate activities including national security ecommerce and personal privacy.
"However, governments and the private sector have a shared interest and collective responsibility to combat the scourge of terrorism."
Australia has been pushing the encryption issue in recent months.
In June, Australian Attorney-General George Brandis said the issue is a priority for the government.
The push to deny encryption to a set of users on the internet is a bipartisan one in Australia, with the opposition Labor party signalling it will back any legislation.
"With terrorism a 21st century conflict, we need 21st century weapons to deal with it," Labor leader Bill Shorten said in July.
"A backdoor is typically a flaw in a software program that perhaps the -- you know, the developer of the software program is not aware of and that somebody who knows about it can exploit," Turnbull said in July. "And, you know, if there are flaws in software programs, obviously, that's why you get updates on your phone and your computer all the time."
At the same press conference, Turnbull told ZDNet that the laws of Australia would trump the laws of mathematics.
"The laws of Australia prevail in Australia, I can assure you of that," he said. "The laws of mathematics are very commendable, but the only law that applies in Australia is the law of Australia."