There are concerns changes to skilled migration rules could further tarnish Australia's reputation abroad with the revamp to leave thousands of foreign students in limbo.

Under the changes, the list of jobs used to select migrants is to be streamlined and reviewed annually, while potential new Australians will need to have better English-language skills.

As a result, about 20,000 people will have their migration applications cancelled and their fees refunded at a cost of about $14 million.

The changes also leave thousands of overseas students facing uncertainty with many to lose the chance to apply for permanent residency because the job for which they are studying will no longer be on the skilled list.

Students affected by the changes will be able to apply for a temporary skilled graduate visa to stay in Australia for 18 months while they gain work experience or seek sponsorship from an employer.

Immigration Minister Chris Evans acknowledged there would be an impact on the overseas education sector but said the changes were about addressing Australia's skills needs.

"If you get a student visa to Australia it's a visa to study. It's not a visa to stay permanently," Senator Evans said.

"This will make a permanent difference so that Australia is able to choose who migrates to this country based on whether they're going to make a contribution and whether they're going to be in employment."

The changes would "in no way" impact on international students coming to Australia to gain a legitimate qualification before returning home, Senator Evans said.

The announcement comes as Australia battles to fix its reputation in the overseas education sector which has been damaged by a string of attacks on Indian students.

"That's the risk that the government has to manage ... and how carefully they do that will determine if our reputation survives these decisions," opposition immigration spokesman Scott Morrison said.

Australian Council for Private Education and Training chief Andrew Smith said the $15 billion sector was already suffering "serious reputational damage" and some institutions would be threatened by the changes.

"We've seen significant drop-off in demand for Australian education from overseas over recent months, for a range of reasons, and we expect that this will further dampen that demand and there may well be job losses," he said.

The Australian Federation of International Students (AFIS) said the changes could further damage Australia's image abroad.

"Coming on top of the collapse of several international student colleges, this is another blow for many students in Australia," the AFIS said.

"If this policy is seen to be all about allowing English-speaking students to jump the queue, it may further risk Australia's international reputation as a fair and tolerant society."

The revamp will also see state and territory-specific migration plans developed, while certain occupations may be capped to ensure Australia's skills needs are met.

Prime Minister Kevin Rudd said the changes were aimed at getting the "right skills mix for the future economy".

"The problem that we have inherited is the skill system of the previous government," Mr Rudd told parliament.

"We need to adjust that for the future."

Australian Industry Group chief Heather Ridout welcomed the overhaul, saying it would help address critical skills shortages that would arise as the economy improved.

"Putting a greater emphasis on a demand driven system that better matches the needs of business will help ease this pressure," Ms Ridout said.

（www.eduwo.com, Anna）