JULIA GILLARD's election pitch to avoid a ''big Australia'' is to be abandoned after a Treasury warning that strong future immigration is ''probably inescapable''.

In another policy retreat, the government's population review has been delayed and ''recalibrated'' to focus on skills shortages and regional growth, rather than nominating population targets.

During the election campaign in August, Ms Gillard said Australia should not ''hurtle'' towards a big population. At the time, she said a Treasury projection that Australia would have a population of 36 million people by 2050 was excessive. ''I don't support the idea of a big Australia with arbitrary targets of, say … a 36 million-strong Australia,'' she said.

However, a Treasury briefing sent to Ms Gillard after the campaign suggests she could have no choice. The briefing warns that the prediction of 36 million people ''factors in a significant reduction'' in migration, from a recent peak of 300,000 to an annual average of 180,000.

It concludes that even if annual net migration was lowered to an unrealistically low 60,000 per annum, Australia's population would still reach 29 million by 2050.

''Given the powerful global forces driving the Australian economy, net immigration figures well in excess of that low number are probably inescapable,'' the briefing says.

''Strong population growth is not necessarily unsustainable. It need not adversely affect the environment, the liveability of cities, infrastructure and service delivery, provided the right plans and policies are put in place now in anticipation of it.''

A senior Labor source said business groups had been pressuring the government to adopt a default position ''where the issue of specific targets is not addressed''.

''I believe the government has accepted the reality that it is not prepared to cut migration to the extent needed to significantly reduce population growth,'' the source said.

Population Minister Tony Burke has indicated the government might miss an April 2011 deadline for its population review, blaming the extended caretaker period while a new government was being formed.

''I don't want to give a commitment that we'll be able to get to that [April] time frame,'' Mr Burke said.

Days before the election was called in July, Mr Burke appointed three population panels to provide advice on demographic change and liveability, productivity and prosperity, and sustainable development.

Treasury's budget update released last week predicted that unemployment will fall to 4.5 per cent by June 2011, heightening concerns that skills shortages could re-emerge as a key issue.

Asked if it was prudent to be talking about immigration cuts at such a time, Treasurer Wayne Swan said the government had refocused the migration program on skills.