Tony Burke orders his department to process student visas on a priority basis

The Albanese Government is imposing a de facto cap on international students by slowing down visa processing despite Peter Dutton blocking legislation to formally limit the numbers coming to Australia.

Home Affairs Minister Tony Burke has issued a new direction to his department ordering it to process student visas on a priority basis until they reach 80 per cent of the threshold for a particular university or vocational provider.

Visa applications will continue to be processed once the threshold is reached but at a slower pace.

Mr Burke, Education Minister Jason Clare and Training Minister Andrew Giles insisted this arrangement was not a cap but said it let the Government better manage student numbers.

A spike in international students returning to Australia after the pandemic border closures lifted has contributed to record-high net overseas migration.

The Opposition has repeatedly linked this to the housing affordability crisis – despite university students largely living in different types of accommodation to that sought by families – and said it would cut the number of students coming to Australia.

But Mr Dutton backflipped at the last minute to oppose legislation imposing caps on how many international students universities and vocational providers could accept.

He claimed the caps would help the biggest universities at the expense of regional institutions, despite the reaction from the sector indicating the opposite was true.

Mr Clare said the new approach would better support regional providers while managing the flow of international students.

“Peter Dutton’s reckless arrogance killed the student cap and in the process, he killed his credibility,” he said.

“It shouldn’t just be the big inner-city unis that benefit from international education. TAFEs, regional and suburban unis should benefit too, and this new approach will help us do that.”

Mr Burke said the cap the coalition voted down would have been “the best option … but this option will still allow us to use one of the biggest levers in our migration system”.

The peak body for universities said the previous ministerial direction, which is revoked under the new arrangements, had wreaked havoc and stripped billions of dollars from the economy and providers.

“This is the commonsense decision that was desperately needed to deliver some of the certainty and stability our universities have been seeking,” Universities Australia chief executive Luke Sheehy said.

The mid-year budget update added another 80,000 people to the forecast net migration for the current financial year, but Treasury still thinks it will drop back to a more usual level of about 255,000 the next year.

It also revealed arrivals are back at expected levels but the number of people leaving the country was still lower than anticipated.