The decision follows a raft of actions since last year to end Covid-era concessions for foreign students and workers in Australia that helped businesses recruit staff locally while strict border controls kept overseas workers out.
"There's about 10% more international students in our universities today than before the pandemic and about 50% more in our private vocational and training providers," Education Minister Jason Clare told a news conference on Tuesday.
The reforms are designed to make the international student sector better and fairer, and this will set it up on a more sustainable footing going forward, Clare said.
International education is one of Australia's largest export industries and was worth $A36.4 billion ($NZ39.7 billion) to the economy in the 2022-2023 financial year.
But polls have showed voters are concerns about large influxes of foreign students and workers putting excess pressure on the housing market, making immigration one of the potential major battlegrounds in an election less than an year away.
Net immigration hit a record high in the year to September 30 last year, surging 60% to a record 548,800, higher than the 518,000 people in the year ending June 2023.
Australia boosted its annual migration numbers in 2022 to help businesses recruit staff to fill shortages after the Covid-19 pandemic brought strict border controls, and kept foreign students and workers out for nearly two years.
The record migration - driven by students from India, China and Philippines - has expanded labour supply and restrained wage pressures, but it exacerbated an already tight housing market.
In a bid to contain the surge in migration, the government last month more than doubled the visa fee for foreign students and pledged to close loopholes in rules that allowed them to continuously extend their stay.
