Retiring Governor-General Quentin Bryce has become a dame and her successor Peter Cosgrove will become a knight, after Prime Minister Tony Abbott restored the system of pre-eminent honours.

The Queen has amended the letters patent for the Order of Australia to allow for the new honours, Mr Abbott said on Tuesday.

The honours category, which was removed in 1986 after only 10 years of operation, will recognise pre-eminent Australians and up to four knights or dames can be appointed each year.

“I believe this is an important grace note in our national life,” Mr Abbott said.

The chairman of the Order of Australia Council will be consulted on any recommendations.

Mr Abbott, a former director of Australians for a Constitutional Monarchy, defended the decision, saying it would enhance the dignity of the existing system.

“I don’t think it’s really any surprise,” he said.

The prime minister made the decision to ask the Queen for the new category in the past few weeks, as he contemplated Dame Quentin’s retirement and General Cosgrove taking on his new role.

He consulted both governors-general on the proposition and said they were happy to accept.

Asked whether it would lock in future governors-general to the monarchy, Mr Abbott said: “People who love our country, I think would be happy to accept this honour.”

Shadow attorney-general Mark Dreyfus said the move showed the government was rushing back to the 19th century.

Australian Greens leader Christine Milne said Australia had gone socially backwards under Mr Abbott’s government.

“Bring on a republic,” she said.

Opposition Leader Bill Shorten didn’t have much to add.

“It’s good to see the government has a plan for Knights and Dames – where’s their plan for jobs?” he said in a statement.

-AAP