A review found the migration program “not fit for purpose,” was failing to attract the most highly skilled people, and was failing to give businesses efficient access to workers.

The system created an environment ripe for exploitation, and the risk of an “emerging permanently temporary underclass”.

Home Affairs Minister Clare O’Neil will announce on Thursday, the government will work to create a three-tiered skilled migration system for the country for the first time.

The three-pronged model would firstly create a highly skilled stream with fast turn around times.

A middle stream where decision making will be linked to Jobs and Skills Australia to ensure a data driven approach.

And a final pathway addressing chronic shortages in the lower paid care sector.

Former senior public servant Dr Martin Parkinson, who led the expert panel, said the system wasn’t doing the job it was supposed to do.

The panel handed down 38 policy reform considerations to the government in its report.

Dr Parkinson said the Temporary Skilled Migration Income Threshold (TSMIT), which was frozen in 2013 at $53,900, needed to be updated.

He also said issues in regional Australia could not be addressed solely through migration, and the same reason why remote areas couldn’t attract residents to live there applied to migrants.

There are now more than 1.8 million temporary migrants living in Australia with the right to work, with many facing “tangled” and lengthy pathways to permanent residence.

“It is not in Australia’s national interest to maintain a large proportion of temporary entrants with no pathway to citizenship as it undermines our democratic resilience and social cohesion,” the report reads.

Ms O’Neil commissioned the review last year, and will flesh out the government’s policy in an address to the National Press Club.

Dr Parkinson said for employers in tech-based industries, the skills list was out of date and was compiled when many new jobs had not yet been created.

The report says Australia risked falling behind other developed immigrant countries such as Canada, and faced more global competition for highly skilled migrants.

Some employer groups have called for looser restrictions on skilled migration caps and target industries, while others want a rethink of English language requirements and rules regarding post-study employment.

Deputy Liberal leader Sussan Ley said the government needed to ensure the new policies did not put undue pressure on the already stretched rental housing market.

Opposition home affairs spokesman James Paterson said Australia was a richer country because of the millions of migrants who had come to its shores.

But the size, composition and timing of the migration intake were “legitimate areas for public debate”, he told Sky News.