Migrant groups are urging Prime Minister Scott Morrison to tread carefully in slowing the intake of some temporary workers and encouraging new arrivals to settle outside of the major cities.
Mr Morrison has also suggested there could be a case for cutting the number of overseas students coming to certain universities as he confronts surging population growth in Sydney and Melbourne.
Carla Wilshire, from the Migration Council of Australia, says there are enormous benefits in regional resettlement for individuals and communities.
"However, it's critical we have the necessary social infrastructure invested into these regional locations," Ms Wilshire told AAP on Sunday.
"We also need to remember a lot of temporary workers that are settling in metropolitan areas are doing so because they have specific skills or qualifications that are vital to building the economy of the future."
Australian Prime Minister Scott Morrison with Treasurer Josh Frydenberg and ministers Simon Birmingham and Sussan Ley. Source: AAP
Ms Wilshire urged the prime minister to maintain a long-term view and consider the population size Australia needs to compete on a global scale.
The government has for months been floating the idea of encouraging migrants to settle in regional areas, but is yet to explain how, given all permanent migrants are free to move where they wish.
One idea is a points-based system to fast-track temporary workers who go to smaller cities or regions.
Mary Patetsos, from the Federation of Ethnic Communities' Councils of Australia, says overseas workers already fill key positions in rural and regional areas, as well as in major cities where locals cannot be recruited.
"They are critical to Australia's economy and society: caring for our elderly and disabled, supporting our nation's agricultural sector and growing Australia's IT and high-tech companies," Ms Patetsos told AAP.
"Any policies that encourage migration to the regions need to be transparent and fair and protect migrants from exploitation."
Labor frontbencher Andrew Leigh is not sure how the prime minister's "thought bubble" would work.
"Yes, we need to get our migration mix right, but it's currently true that you get additional points for having studied in a regional area," Dr Leigh said.
"The Department of Home Affairs says you can't compel people to live in particular cities. So, let's wait and see where he's actually going with this."
