Reproductive human cloning will, however, remain banned.
Therapeutic cloning, otherwise known as somatic cell nuclear transfer (SCNT), involves introducing a person's DNA into an unfertilised egg to create stem cell tissues that are genetically identical to that person.
The technique is thought to hold great potential for treating a number of debilitating diseases such as Alzheimer's, Parkinson's and cystic fibrosis.
Last December, Australia's House of Representatives voted in favour of an amendment to the Infertility Treatment Act, which would allow such research to be conducted on unfertilised eggs left over from in vitro fertilization (IVF) treatment, however, before new legislation is passed, it must first be approved by each individual state.
This week, the state of Victoria will kick off the voting process, with Queensland and New South Wales expected to soon follow.
Victoria is known to be heavily in favour of the change and it is expected that the state's politicians will push the legislation through.
A recent poll on the subject by Research Australia - an alliance of national organisations that aim to make health and medical research a higher national priority - found that Victorians are more supportive of stem cell research than the general population.
The online survey of 200 people revealed that 78 per cent of Victorians support stem cell research on excess embryos from IVF treatment (compared to 74 per cent of respondents in a larger Australian survey), while 64 per cent supported therapeutic cloning (versus 58 per cent in the national survey).
Despite this, Rebecca James, CEO of Research Australia, told Outsourcing-Pharma.com:
"The debate hasn't finished yet
[the amendment to the law] still has to go through the Legislative Council so we don't know [what] the outcome [will be]."
"This is a highly contentious issue in Australia and we respect the right of members of parliament to make a conscience vote.
Our aim [for conducting the research] was to gauge the level of public support."
Contentious it is indeed.
The country's desire to be at the forefront of such research is not shared by all, and fierce debates have continuously broken out over the issue, which is strongly opposed by church groups and those who think the practice is taking science too far and could put the country on a path that will eventually lead to the acceptance of human cloning.
However, it is becoming increasingly likely that these protests will remain largely ignored - the southern-hemisphere country is well known for being fiercely competitive, particularly in its dominance in the world's sporting arena, and it has been increasingly displaying this competitive nature in the biotech field.
The passing of the new legislation would allow it to keep up with countries such as the United Kingdom, China, South Korea, Japan, Belgium and Sweden, who all have legislation allowing carefully regulated therapeutic cloning, with Spain and South Africa likely to soon join them.
"The consequence of not passing laws allowing it here would risk Australia falling behind the rest of the world because clearly this is an avenue of research which is afforded by the majority of developed nations," said Victorian Premier Steve Bracks.
In addition, the national Research Australia survey also found that two thirds of Australians agreed that it was "vital for both adult and embryonic stem cell research to be carried out."
Australia's biotechnology industry is continuing to mature and an increasing number of companies now have products in Phase II and Phase III development.
The nation has also attracted the presence of pharmaceutical giants such as Merck, Pfizer, Eli Lilly, GlaxoSmithKline, Novartis, and AstraZeneca.
As a result, Australia has the largest biotechnology presence in the Asia-Pacific region, attracting more VC investments than any other Asia-Pacific country and life science firms in the country raised almost A$630m (€388m) in 2006.
However, the profitability of the industry is currently heavily reliant on one large company, CSL, and is still markedly trailing the more advanced biotech market in the US, according to Ernst & Young's 2007 Global Biotechnology Report, released this week.
Stem cell research is staunchly opposed in the US by the current government and much of the nation's conservative population, and although all types of stem cell research are legal in the country, any form of federal funding for embryonic stem cell research is currently banned.
This potentially explosive corner of the biotechnology market, therefore, may provide Australia with an opportunity to advance itself in this arena and help take on the US in a David and Goliath style battle.