The UK can learn from Australia's policy of awarding visas to foreign graduates to plug an IT skills gap, says Bob Kinnaird.

As the UK moves towards a points-based immigration system more closely linked to international education, some reflection on the Australian experience is timely.

Since 2001, Australia's policy has been to grant permanent residence visas to foreign graduates from selected Australian courses. This has delivered huge increases in the number of foreign student enrolments and in revenue to universities, but it has been an abject failure in terms of domestic impact.

Although official pronouncements give no hint of this, visa-driven higher education programmes have distorted the graduate job market in Australia, damaged the employment prospects of home graduates and led to massive drops in the number of local enrolments in information technology, where foreign students are concentrated.

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Australia changed its points-based immigration system in 2001 to allow international students graduating from Australian university courses in designated shortage fields to obtain a permanent residence visa straight after graduating. Before, they had to leave Australia and build up several years of professional-level work experience overseas before they could apply for a permanent visa.

The effect of this shift to so-called onshore visas was immediate and beyond the wildest dreams of university administrators and education bureaucrats. The number of foreign students starting courses in IT rose by 0 per cent in the year the new visa rules came into force. Accounting, another field that attracts top migration points, experienced a similar leap.

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The prospect of a permanent residence visa after studying in Australia was like a magnet to foreign students, especially those from China and India. Soon, immigration authorities were pumping out thousands of permanent visas a year to international students graduating from these courses, especially in IT.

But there was a downside. There was an oversupply of Australian IT graduates. Official data made the problem clear, but immigration officials claimed to be unaware of this. Between 2000 and 2003, the proportion of Australian IT graduates looking for full-time jobs four months after completing their course rose from 12 per cent to 32 per cent. The rate dropped to 26 per cent in 2005, but was still well above the national average of 19 per cent for all graduates - and double the rate in fields with genuine shortages, such as accounting. But despite evidence that local IT graduates were in trouble, the Government increased the number of visas granted to foreign IT graduates - from 3,300 in 2001-02 to 5,300 in 2004-05.

The visa programme increased technology graduate labour supply by nearly 80 per cent at a time when nearly one third of Australian IT graduates could not find full-time work.

The consequences were predictable. Between 2001 and 2006, the number of Australian students starting university courses in IT plummeted 50 per cent. Other factors prompted Australian students to turn away from technology courses. As in the UK and US, they included the dotcom crash and growing uncertainty about job security due to offshoring of IT work to India and elsewhere and increased course fees.

But market distortions caused by short-sighted visa policies turned an IT enrolment decline into a total collapse.

Like ostriches with their heads in the sand, both the Government and the higher education sector refuse to acknowledge the situation. In mid-2006, the Australian Minister for Information Technology released a high-profile report Building Australian ICT Skills . This identifies the IT enrolment problem but does not mention the role of visa rules in the glut of IT graduates.

Not everyone is ignoring the issue, though. David Wilson, an associate professor in the IT faculty at Sydney's University of Technology, observes: "We need overseas students to bolster enrolments, but the domestic graduates have to fight with them to get jobs."

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And last year, the Australian Computer Society called for "substantial reductions" in the number of visas for foreign graduates in IT but warned that if immigration "pulled the lever too hard, it would bankrupt our university system".

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Meanwhile, the Government defined the problem as the lack of employability of foreign student graduates because many were having trouble in Australia's professional job market. Its solution was to set up a migration inquiry that was charged with recommending ways to improve their employability in Australia, but was prevented by its terms of reference from assessing the impact of its proposals on local graduates.

In May, the ministers for immigration and for education adopted the inquiry's key recommendations: higher English-language standards to qualify for permanent visas and new temporary work visas for foreign graduates to help them gain one year's skilled professional entry-level work, which is one new pathway to permanent visas probably from July 2007. The Australian Vice-Chancellors Committee welcomed the announcement.

The new temporary work visas will probably lead to more international graduates competing with Australians for entry-level jobs, perhaps depressing wages as well. There is no suggestion that visas should be granted only if no Australian graduate can do the work.

Like the decisions to grant permanent visas to foreign IT graduates during 2001-06, these latest visa arrangements for foreign graduates have been adopted with no detailed assessment of their real domestic impact.

This shows clearly the extent to which the sectional interests of the international education industry and visa-seeking foreign students drive migration policy in Australia.

The heart of the problem is that linking international education more closely with visa policies creates unavoidable conflicts of interest for governments, universities and - in Australia - the professional societies drawn into the visa system.

In Australia, these conflicts lack transparency, have been badly managed and typically resolved in favour of the financial interests of universities and governments, to the detriment of local graduates and students. The solution is greater transparency and a serious commitment from the Government to operate visa policies to serve national not sectional interests.

Bob Kinnaird is an independent immigration analyst with consulting firm R. T. Kinnaird and Associates.

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