With the global meltdown tipped to increase unemployment, the Coalition has urged a cut in this year's intake before the May budget.

Senator Evans said the intake was closely linked to the economy and demand for labour.

''This Government puts Australian jobs first. If a skills shortage doesn't exist, we would expect employers will not employ non-Australians,'' he told a Senate estimates hearing.

''If there is a drop in demand for skills and labour in the economy, you would expect that you would run a smaller migration program.

''I'd envisage certainly that the migration program for next year would be smaller than this year.''

Immigration Department secretary Andrew Metcalfe faced a barrage of questions from Liberal senators Chris Ellison, Guy Barnett and Concetta Fierravanti-Wells.

But he refused to say what immigration numbers could be in 2009-10.

He said cabinet would decide on immigration, though he did warn the number of Working Holiday makers could fall as the economic slow-down continued.

Mr Metcalfe said the department would fine-tune immigration to meet the different needs of capital cities like Melbourne and Sydney, compared to Western Australia and Queensland.

Demographic trends suggest more older Australians will leave the workforce from 2010-11 than young Australians will join it, meaning more skilled migrants will be needed in the long term.

Senator Evans stressed cabinet had not yet decided on immigration, nor would it decide until the lead-up to next year's budget.

Asked by Senator Ellison if people on 457 visas skilled migrants could be sent back home as the labor market tightened, Senator Evans confirmed it could happen.

But he warned that restrictions on foreign students, who were permitted to work up to 20 hours a week, could hurt Australia's economy.

He said other countries were already mimicking Australia's policy on foreign students working while studying.

''After coal and iron ore, they are the third-highest contributor of inflows to the economy,'' he said.

''A knee-jerk response might be to restrict student work rights, but that reduction would reduce the number of students coming to study, [which] might have a negative impact on the economy.''

The 2008-09 migration program is set at 190,300 places; a 19.8 per cent increase on the previous year.

About 70 per cent of those places are for skilled migrants.

The upcoming Mid-Year Economic and Fiscal Outlook would give the Government a better idea of what was needed, Senator Evans said.