New South Wales Waratahs coach Michael Cheika has agreed in principle to replace Ewen McKenzie in charge of the Australian rugby team, The Australian newspaper reported on Monday citing "an informed source."

Cheika led the Waratahs to the Super Rugby title last season, completing a unique coaching double after he guided Irish province Leinster to a Heineken Cup triumph in 2009.

The report said Cheika was hoping to retain control at the Waratahs and combine that role with his duties as national coach in the lead-up to next year's World Cup in England.

An Australian Rugby Union (ARU) spokesman said on Monday they were "still in the process of investigating options to replace Ewen McKenzie."

"At this stage, no prospective coaches have been confirmed in the role but we hope to have a solution in place and announced before the team leaves for the Spring Tour on Friday," he added in an emailed statement.