The federal government has announced plans to radically reform Australia’s migration system by focusing on maximising skilled migration and cracking down on exploitation in low paid temporary migrant schemes and international student programs.

Minister for Home Affairs the Hon. Clare O’Neil announced plans for sweeping reforms to migration settings including reducing the number of visa categories, providing more support for migrants after arrival – including preventing worker exploitation – and speeding up the visa application process.

She also announced a three-tiered assessment system designed to cut red tape and reduce delays to permanent residency. These would include special highly skilled migrants who could help drive innovation, skilled migrants earning above temporary migrant income threshold and workers in essential industries such as care.

Speaking at the National Press Club in Canberra, Ms O’Neil pledged to give all skilled temporary workers currently in Australia chance to apply for permanency and also an increase the temporary migrant income threshold from $53,900 to $70,000.

Ms O’Neil said migration was a “missed opportunity” in helping to drive innovation and economic growth.

“What we have is a large poorly, designed system that is focused on temporary migrants that is driving exploitation,” she said.

Ms O’Neil said the reforms would not mean a larger immigration system but a more targeted one.

“We want to get this powerful engine working in the national interest,” she said.

Earlier, Prime Minister Anthony Albanese described the immigration system as “broken” with over a million people in Australia waiting for visas.

“Giving people more permanency and security means they will be able to make a great contribution to the Australian community,” the Prime Minister said.

Ms O’Neil told the press club Australia’s immigration system was not delivering the skills the nation needs to address the challenges it faces.

“Historically, the success of our immigration system has been routed in permanency and citizenship but now it’s dominated by a temporary workforce,” she said.

“We also have an outdated occupations list that does not reflect the skills we need.”

Ms O’Neil said another issue was the fact that international students are the largest component of the temporary migrants and the biggest feeders into the permanent migration program.

She said the system was slow and crazily complex with hundreds of visa categories and sub-categories.

“There is also slow processing of skills and qualifications recognition. It is impossible for large companies to navigate the system and small businesses have Buckley’s chance.

“This means the people we need, such as aged care nurses, engineers and tech experts are being put off coming here,” Mr O’Neil said.

Her comments came after a review, led by former public service boss Martin Parkinson, which makes the case for wholesale reform to the migration system to prevent Australia becoming a nation of “permanently temporary” residents.

The 200-page report proposes changes to the skilled migration program, student visas and employer sponsored visas and outlines the steps needed to ensure Australia can “reap the opportunities and navigate the challenges” that arise over the next two decades.

The report’s central recommendation is to create three tiers of regulation for migrants: a “light-touch” approach for very skilled migrants on high salaries; a mid-level cohort of migrants who earn above the amount of the temporary skilled migration income threshold; and a lower-wage cohort in sectors with skills shortages such as the caring economy.

The government has accepted this recommendation and will work with states, business sector, unions and civil society to determine the pay thresholds.

The report found that the points test used to select skilled migrants fails to identify the best applicants and describes the skilled occupation list as “outdated” and lacking a “strong evidence base”.

“They do not reflect current or anticipated skilled labour needs, including to support the transition to a net-zero economy or to build critical and sovereign capabilities,” the report says.

“There is growing international competition for highly skilled migrants and Australia risks falling behind without more innovative and attractive visa products and service delivery.”

Dr Parkinson’s review warns that Australia’s migration system is failing to retain “the best and brightest” international students in the country, with many struggling to transition into the labour market or consigned into jobs below their skill level.

“The student visa program should be an important source of high performing skilled migrants but has not delivered on its potential,” the review said

“Various student and temporary graduate visa setting inhibit students’ opportunity,” it said.

Existing systems have been ineffective in protecting migrant workers from underpayment, with the review arguing the minimum salary threshold for temporary skilled migrants is “too low”.

The review report also criticises Australia’s fragmented approach to attracting lower paid workers to fill labour shortages in areas like the care sector.

“Australia lacks an explicit migration policy focusing on lower paid workers and has taken a piecemeal approach that is not meeting our needs or protecting vulnerable migrant workers,” it says.

Ms O’Neil said the revamped immigrations system would be underpinned by Australian values.

“We need to ensure there is integrity in the system so it’s important we have post arrival monitoring to prevent exploitation,” she said.

“We need fairness and an end to the focus on temporary visas as well as clearer pathways to permanence.

“And we need inclusiveness. It’s important that skills recognition includes secondary applicants – who are mostly women – so they are able to enter the labour market at a level that matches their qualifications,” she said.

CEO of migrant and refugee settlement agency AMES Australia welcomed the government’s planned reforms.

“We very much welcome the federal government’s response to the immigration review. Australia’s approach to migration as a pathway to nation building needs to be underpinned by an overarching framework that brings a whole of government approach to the nation building effort, and perhaps with the re-establishment of a stand-alone immigration department,” Ms Scarth said.

“Australia’s immigration system also needs data and analysis. Although the recent census was the first to collect data on cultural diversity, Australia does not have a dedicated research body looking at migration in Australia, such as the UK’s Oxford Migration Observatory or the US’ Migration Policy Institute.

“A simpler visa category and processing regime and a clearer and more expedient pathway to permanent residency would make Australia more attractive to migrants, especially those with in-demand skills.

“In our experience, family migration is a core component of successful settlement. Consequently, valuing and streamlining processes to expedite family reunion will contribute to the direct wellbeing and sense of belonging of newly arrived migrants.

“Another critical factor, if we are to realise the opportunities migration presents in terms of our economy and the nation building exercise, is the need to ensure migrants get settlement and employment support soon after arrival to ensure they are connected quickly with job opportunities in areas where there are shortages,” Ms Scarth said.