SYDNEY (AFP) - Australia on Monday (Feb 22) said an asylum seeker baby whom doctors had refused to discharge from hospital is expected to be returned to a remote Pacific detention camp as a deterrent to people smugglers.

Under Canberra's harsh immigration policy, asylum seekers attempting to arrive in Australia by boat are sent to camps in Papua New Guinea and Nauru, where they are held while their refugee applications are processed.

They are blocked from being resettled in Australia even if found to be refugees.

The case of one-year-old Asha, the daughter of Nepalese asylum seekers who was brought to Brisbane suffering burns last month, prompted a standoff with doctors and a week of rallies outside the Lady Cilento Children's Hospital.

Medical staff had refused to release her until a suitable home environment had been identified.

Immigration Minister Peter Dutton said she had now been moved to community detention, where asylum seekers waiting for their refugee applications to be processed live within the community and are usually allowed to move around freely.

But he added that the government would not back down on its policy of returning her to offshore detention once medical and legal issues had been resolved.

"She's in community detention and obviously support will be provided to the family," Mr Dutton told the Nine Network.

Churches, state governments and even New Zealand have offered sanctuary to Asha and the 266 other asylum seekers also in Australia for medical care.

But Mr Dutton said this would not be happening, saying it would only encourage people-smugglers.

"I've been very clear, the government's been very clear from day one, that we have a responsibility not only to this baby, but to the babies who drowned at sea before and also potentially to babies that will drown again if the people-smugglers got back into business," he said.

"So there is a much bigger issue at play here and, as I say, as a country we should be proud because we bring in record numbers of refugees through the UN and through the Special Humanitarian Programme.

"But we are not going to allow a message to get out that people can come to Nauru, come to Australia for medical assistance and then that will be their ticket out into Australian society. That is not going to happen."

Canberra has long defended its hardline policy, which also includes turning boats back, saying it has prevented deaths at sea and secured its borders.

Under the previous Labor government, at least 1,200 people died trying to reach Australia by boat between 2008 and 2013.