An influential parliamentary committee has recommended the federal government overhaul the skilled migration program to give temporary workers and some international students clearer pathways to permanent residency in Australia.

Parliament’s Liberal Party-dominated Joint Standing Committee on Migration has said that in the face of the COVID-19 pandemic Australia should change the conditions for the short-term stream of the temporary skills shortage visa “to provide a pathway to permanent residency for temporary migrants”.

It says all employer-nominated visas should provide the option of a path to permanency provided people had competent English language skills and were under the age of 45.

The final report of the committee, tabled in federal parliament this week, also recommended some international students be given a smoother path to permanent residency if they graduate from a university course that leads them to a job in an occupational area with persistent skills shortages.

Criteria would include graduating in the top 10 per cent of all graduates in their course, or achieving first class honours.

The chair of the committee, Liberal MP for the Sydney seat of Berowra Julian Leeser, said that more than 500,000 temporary migrants had left Australia since the onset of the coronavirus pandemic “and the lack of skilled migrants coupled with record low unemployment has led to major skill shortages in many sectors of the Australian economy”.

The report also recommends consolidating the current skills lists, replacing the Australian and New Zealand Standard Classification of Occupations system, providing more concessions for regional visas, improving the customer service function of the Department of Home Affairs, and relaxing some labour market testing requirements.

In the report’s foreword, Mr Leeser said the current pause in the skilled migration program because of the international border closure had provided an opportunity “to have a less constrained examination of the skilled migration program than might ordinarily be possible”.

He said the hiatus in people movement allowed policymakers to reflect on whether or not the skilled migration settings were serving Australia’s interests, and whether the country remained an attractive destination for skilled migrants.

The recommended overhaul of skilled migration comes as the Morrison government is also considering changes, including a community sponsorship scheme which would see private groups or community organisations cover the financial costs and settlement support for humanitarian entrants.

Labor members of the committee used additional comments attached to the report to criticise the recommended relaxation of labour market testing, which would almost certainly spark opposition from unions.

They said the report was a missed opportunity, because many of the recommendations were “reactive, piecemeal administrative tinkering, lacking significant policy reform”.

Earlier this year, the Grattan Institute called for root and branch reform of the system. It criticised the government for shifting the composition of Australia’s permanent skilled migrant intake away from “skilled migrants best placed to succeed in Australia” towards unproven programs, including the ‘global talent’ program, a streamlined visa pathway for highly skilled professionals to work and live permanently in Australia.