The prime minister, along with state and territory leaders, agreed the seven-day isolation period won't be lowered further to five days, as has been done in other countries.
"We believe the settings are right at seven days, to ensure how we are managing the pandemic here in Australia," Prime Minister Scott Morrison said.
"The issue will remain under constant review."
The move came as the medicines regulator approved a fourth vaccine, Novavax's protein-based Nuvaxoid, which is expected to become available at the end of February.
However, it will only be initially available to adults and not part of the booster program.
While the return to schools was a key item on the national cabinet agenda, surveillance testing for students and teachers will be handled on a state-by-state basis, should they choose to do so.
State and territory governments are set to detail their own return to school plans in coming days.
Mr Morrison said should regular testing through rapid tests be carried out at schools, the cost will be split 50-50 between the Commonwealth and state governments.
"We are seeking to work constructively with states and territories, states and territories will make decisions to keep schools open," the prime minister said.
Chief Medical Officer Professor Paul Kelly said there was no modelling on how high COVID-19 case numbers would be once schools return at the end of the month.
However, he did expect transmission risk to increase in coming weeks.
"Having children back in the class will increase the movement around cities and towns," Professor Kelly said.
"We do expect (the transmission potential) to increase, it will increase as schools go back, and that is something we need to deal with, and we are very much in agreement to get schools back."
National cabinet also agreed not to lower the age people can get a forklift licence to 16 in order to help address supply chain issues.
Prof Kelly indicated the country's leading advisory group on immunisation was considering whether a booster shot should be added to the definition of a person being "fully" vaccinated.
Currently, 58.7 per cent of those eligible have received their booster shots.
The Therapeutic Goods Administration also on Thursday allowed two oral COVID-19 treatments to be used.
The regulator approved the first oral treatments for COVID-19, the Pfizer-made Paxlovid, along with Lagevrio.
However, the treatments are not intended to be used as a substitute for a COVID-19 vaccine.
Health Minister Greg Hunt said the new treatments will be able to be prescribed to people by their doctor.
"That means they won't necessarily have to take them in hospital ... and it adds to our protection and will focus on those that have mild to moderate symptoms but are at risk of severe disease," Mr Hunt said.
The government has ordered 800,000 courses of the treatment, which are expected to arrive in the country in coming weeks.
Meanwhile, Australia has passed the grim milestone of having recorded two million COVID-19 cases since the pandemic began two years ago.
While it took until January 10 for the country to record one million cases, it took just 10 days for the second million cases to be reached.
There were 30,825 cases and 25 deaths reported in NSW on Thursday, with a further 21,996 infections and 15 fatalities in Victoria.
Queensland registered nine deaths and almost 17,000 cases while South Australia had 11 deaths and 3777 cases.
There were 927 cases in Tasmania, 892 in the ACT and 10 in Western Australia.
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