Previously, most overseas students had to return to their home countries after graduation, but under changes to the Government's skilled migration laws that came into effect this month many more will be able to stay in Australia for an extra 18 months.

During that time they will have a compelling incentive to get jobs in their industries: points towards permanent residency.

Analysts have estimated that as many as 30,000 former international students might be competing for jobs, leaving domestic graduates as "collateral damage" as they face a flood of people with strong incentives to accept low wages.

The changes were designed to make sure students who were given permanent residency because they had studied in areas of skill shortages found employment in those industries, by giving them a chance to improve their English skills or get work experience.

But the Government has capitulated to pressure from educational institutions and widened the categories eligible for the new 485 temporary visa, deviating from the original recommendations by Bob Birrell, a Monash University demographer commissioned to evaluate the previous policy.

This means that students who have studied to become fashion designers, journalists or park rangers will be competing against local students for jobs, as well as those who have taken courses in areas such as engineering and accounting where Australia is in dire need of skilled workers.

Universities and many private colleges rely on international students and warned the Federal Government when it mooted the changes that the more onerous requirements for permanent residency might prompt students to study in another country.

But extending the temporary visa to more courses would allow educational institutions to market it to students as an extra reason to come to Australia.

A labour market analyst, Bob Kinnaird, warned there was a risk the visa would create oversupply in the graduate labour market, with some overseas graduates undercutting wages or even working for nothing to qualify for permanent residency.

Mr Kinnaird said Australian graduates would be most affected. "They've been loaded with increased HECS fees … hit by reduced student assistance through Austudy and now they're going to get a triple whammy through this 485 visa."

A spokesman for the Federal Minister for Education, Julie Bishop, said it was a matter for the Immigration Minister, Kevin Andrews, who last night had not responded to calls.

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