Prime Minister Julia Gillard has accused Tony Abbott of using inflammatory language to stoke fears about asylum seekers.
"It's meant to cause fear and concern in communities," she told reporters in Melbourne on Friday.
Ms Gillard said that Australia faced a "challenge" with asylum seekers but there was no place in the debate for inflammatory language.
A refugee at the Nauru detention centre protest with signs and chants of freedom. A view of the Nauru detention centre where Amnesty International say 387 refugees are packed into leaky tents in hot, cramped conditions. Photo: Angela Wylie
The Opposition leader has unveiled plans to reduce Australia's humanitarian intake by more than 6000 from 20,0000, to 13,750, which he says would save Australia $1.3 billion over four years.
Earlier Immigration Minister Chris Bowen had labelled Mr Abbott's push to slash the intake as a ''backflip'' that would disappoint African and Middle Eastern communities who wanted to see refugees in camps settled here.
In August, the Gillard government announced it would increase Australia's annual humanitarian intake from 13,750 to 20,000, and then to 27,000 within five years.
Opposition Leader Tony Abbott Photo: Alex Ellinghausen
During negotiations with the crossbenchers in June, Mr Abbott also offered to increase the intake to 20,000 over three years, to try and to get support for Coalition amendments that would have knocked back the Malaysia solution.
Mr Bowen this morning said Mr Abbott's plan would disappoint the African and Middle Eastern communities who wanted to see people in camps settled here.
Mr Bowen said the plan also had implications for existing programs that the Coalition had supported. The minister cited the government's decision to boost intake from Syria by 1000 places, which was supported by Shadow Immigration Minister Scott Morrison. Mr Bowen said that increase could only occur because of the overall boost.
''Mr Abbott has said the increase sends all the wrong signals to asylum seekers, he just doesn't get it. It sends the right signal,''' Mr Bowen said.
''It sends a signal that there is another way, that you don't have to get on the boat to get a chance at a better life in Australia. That you can, if you are in refugee situation around the world, apply and that there is a path and there is a chance.''
Mr Morrison said that initiatives like the Syrian program would not be affected by the Coalition announcement today.
He said that of the Coalition's 13,750 places, none would be filled by people arriving by boat, with temporary protection visas granted on top of that number.
Mr Abbott told ABC radio on Friday morning: ''We think that with the borders out of control as they are, this is the last message we should be sending to the people smugglers and their customers - that we're making it easier for people to come.''
The coalition would reserve 11,000 of the 13,750 humanitarian visas on offer each year for those waiting in refugee camps.
Mr Abbott is also developing plans for a work-for-the-dole type scheme for working-age holders of bridging visas – he said making refugees work for their welfare would break the ''something for nothing mentality''.
With the government unable to send to Nauru or Manus Island the thousands who continue to arrive by boat, the government will release them into the community but under the same no-advantage conditions as if they were on one of the Pacific islands.
In the interim, they will be given bridging visas which forbid them to work and forbid family reunions, but to help them get by, they will receive about $435 a fortnight in welfare payments.
Mr Abbott said on Thursday that consigning people to welfare for five years was a poor way to prepare them to become citizens.
Mr Abbott said he had run the plan by the coalition's leadership group and was confident the rest of the parliamentary party would support it.
''As you know from time to time on both sides of politics party leaders after consulting their senior colleagues will announce positions that are designed to respond to matters that have come up,'' he told the ABC on Friday.
''It's very similar to policy that we've taken to the last election. I'm confident that would have the overwhelming support of my colleagues.''
Mr Bowen said the ''re-announcement'' of the work-for-the-dole type scheme was ''strong on rhetoric, but short on policy.''
Earlier this morning Mr Abbott was challenged about his repeated use of ''illegal'' to describe people claiming asylum – he said the term had ''perfect legitimacy''.
The official term for people coming by boat is ''irregular maritime arrivals'' or IMAs.
But Mr Abbott insisted they were coming ''the wrong way'' to the country.
''These people are coming to Australia in breach of Australian law, they are illegal arrivals by boat,'' he said.
Greens Senator Sarah Hanson-Young said Mr Abbott had swapped his ‘‘dog-whistle for a megaphone’’ and proved that he knew nothing on asylum seeker policy and was ‘‘demonising’’ refugees.
The South Australian Senator said that reducing the humanitarian intake would drive more people to make dangerous sea journeys.
‘‘There is nothing illegal about seeking asylum in Australia it just shows that he is prepared to do whatever it takes to win the next election on the back of some of these nasty, nasty comments, that are similar to those used, and held by Pauline Hanson,’’ Senator Hanson-Young said.
‘‘This is Tony Abbott at the bottom of the barrel scraping his way, and unfortunately Julia GIllard is not far behind.’’
Senator Hanson-Young and her colleague Richard Di Natale have introduced legislation for the creation of an independent body to assess the health and mental illness problems in the detention network.
‘‘We are locking them up, we’re restraining them, we are doing the sort of things we did to people in the 19th century. It is unacceptable,’’ Senator Di Natale said.
The panel has the backing of Amnesty, Human Rights Commission and the Australian Medical Association.
Independent MP Andrew Wilkie said Mr Abbott's plan to reduce the intake was appalling given he offered to increase it during post-election negotiations in 2010.
"It makes a mockery of Tony Abbott’s offer to me after the 2010 election to increase the humanitarian intake to 20,000, and the same proposal by the Opposition to Senator Sarah Hanson-Young at the time of Rob Oakeshott’s offshore processing bill," Mr Wilkie said.
"Seems the 20,000 figure only suits the Opposition when it’s related to its own political self-interest."
WITH PHILLIP COOREY, AAP