States will have more say on where migrants go under a national plan to send new arrivals to where they're needed.
Australia's migration intake will stay at a similar level as Scott Morrison's hand-picked expert warns against cutting it any further.
A national framework will be set up combining up-to-date data on skills shortages with long term infrastructure planning in a bid to give states more control over where migrants go.
"This is an area where we need greater input from states and territories," Prime Minister Scott Morrison said after his first Council of Australian Governments meeting in Adelaide on Wednesday.
"We need to know how many more engineers you need in Whyalla or Newcastle, not just in NSW or South Australia."
Australia currently accepts about 160,000 migrants each year, despite having a higher cap of 190,000.
Looking forward, Mr Morrison said he hasn't seen any evidence contradicting years-old advice to the immigration department that a migration intake of between 160,000 and 210,000 is "safe".
Researcher Peter McDonald, who Mr Morrison chose to advise the meeting on population, told the meeting the 190,000 cap had worked well for eight years, and there was no need to change it.
Professor McDonald said Australia was facing a labour crunch due to baby boomers retiring, and migration was needed to fill job vacancies over the next decade.
"Take 15,000 people out of Sydney next year, it won't help with the infrastructure issues," Prof McDonald told Sky News.
He said cutting the migration intake would barely affect congestion in Sydney and Melbourne, but it would hurt skills shortages in smaller states, and over the longer term.
The migration rate will next be set in the April federal budget papers.
State and territory treasurers will be tasked with creating the framework, beginning the process when they meet in February.
Population will also become a standing agenda item for future COAG meetings.
NSW Premier Gladys Berejiklian, who has been lobbying for migration numbers to be cut as a solution to congestion, welcomed the pact saying it is important for states to have a greater say on the issue.
Victorian Premier Daniel Andrews said the framework acknowledges infrastructure and the national population were "essentially the same issue".