It is also considering a more general ban on state employees wearing the headscarf and other religious symbols.
The measures are seen as an attempt to counter the rise of the far-right Freedom Party, whose candidate narrowly lost last month's presidential vote.
The centrist coalition nearly collapsed last week amid crisis negotiations over the government's future direction.
'Symbolic' step
Detailing the package of reforms, the coalition devoted just two lines to the planned ban on the Islamic niqab and burqa.
