The changes would focus on overhauling of the queueing system that identifies occupations in demand and creates a points system.
The immigration minister would have the new legal authority to set a maximum number of visas for a single occupation.
The state governments would be asked to develop new migration plans. The Australian immigration department would tightened the rules from today, The Age reported.
Foreign students, who have a qualification for an occupation which is no longer in demand, could apply for a temporary 18-month visa.
This would allow them to gain work experience and give a foreign graduate time to find an employer willing to sponsor their application as a skilled migrant, and if they failed in their attempt they will have to return to their country of origin.
The cancelled applications apply to all offshore general skilled migration claims lodged before September 2007.
For onshore overseas students, government would introduce transitional arrangements to apply until 2012.
The new system would set a new list of occupations in demand and expected to favour skilled workers, including nurses, general medical practitioners, mechanical engineers and teachers instead of groups such as cooks and hairdressers.
Meanwhile, immigration minister Chris Evans was likely to argue that the skilled migration programme had not worked in Australia's economic or demographic interests.
"The program has been delivering self-nominated migrants from a narrow range of occupations with poor to moderate English language skills who struggle to find employment in their nominated occupation," Senator Evans said.
He was also likely to acknowledge the impact of changes on the foreign students, but said 'they can still gain residency if they gain qualifications in professions that are in demand', The Age reported.
He said the current tensions and misunderstandings have been made worse by unscrupulous migration agents.
"[These agents] have been misleading many international students into believing that a course in Australia gave them an automatic entitlement to permanent residence," Senator Evans said.
"It does not, and it will not" Evans would also argue that the government supports skilled migration and continues to want migrants, "be they from India, the United Kingdom or China -- our three largest source countries or elsewhere".
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