The decision follows a raft of actions since last year to end COVID-era concessions for foreign students and workers in Australia that helped businesses recruit staff locally while strict border controls kept overseas workers out.
"There's about 10% more international students in our universities today than before the pandemic, and about 50% more in our private vocational and training providers," Education Minister Jason Clare told a press conference.
New international student enrolments will be capped at 145,000 for universities, which is around 2023 levels, and 95,000 for the practical and skills-based courses.
Clare said the government would inform universities on their specific enrolment caps.
Universities Australia said the government move would "apply a handbrake" to the sector.
"We acknowledge the government's right to control migration numbers, but this should not be done at the expense of any one sector, particularly one as economically important as education," Universities Australia Chair Professor David Lloyd said in a statement.
International education, Australia's fourth-biggest export after iron ore, gas and coal, was worth A$36.4 billion ($24.7 billion) to the economy in the 2022-2023 financial year.
But polls have showed voters are concerned about large influxes of foreign students and workers putting excess pressure on the housing market, making immigration one of the potential major battlegrounds in an election less than an year away.
Net immigration hit a record high in the year to Sept. 30, 2023, surging 60% to a record 548,800, mostly driven by students from India, China and Philippines. That was higher than the 518,000 people in the year ending June 2023.
In a bid to contain the surge in migration, the government last month more than doubled the visa fee for foreign students and pledged to close loopholes in rules that allowed them to continuously extend their stay.
