MELBOURNE: Malaysians will be among thousands of would-be migrants to Australia who will have their applications cancelled as part of an Australian Government overhaul of the skilled migration programme.

Australia's Immigration Minister Senator Chris Evans Monday announced that Canberra was reforming the permanent skilled migration programme to make it demand rather than supply driven.

Highly skilled workers such as healthcare, engineering and mining professionals would be among those most sought after under the new scheme, the minister said in a statement.

Evans said the major changes that he would be making included cancelling and refunding the applications of 20,000 prospective migrants currently living overseas and tightening the list of occupations in demand so that only highly skilled migrants would be eligible for a visa.

The points test used to assess migrants will be reviewed to ensure that it selects only the best and brightest, state and territory-specific migration plans will be developed and certain occupations may be capped.

The new arrangements will give first priority to skilled migrants who have a job lined up with an Australian employer.

For those who don't have a professional sponsor, the bar is being raised.

"There are plenty of occupations where there is an adequate supply of young Australians coming through our schools...to take up new job opportunities," Evans said.

Meanwhile, government MP Kelvin Thomson said skilled migration needed to be scaled back because it fueled runaway population growth, put downward pressure on wages and conditions, and came at the expense of training young Australian workers.

He said the programme had got out of control since the previous Howard government started allowing international students to apply for permanent residence onshore, instead of making them return to their home countries first.