Caps on international university students for specific courses will be a last resort, the education minister says, as peak bodies call for controversial visa rules to be lifted.
A Senate report examining international student levels at universities has recommended limits on individual courses be scrapped.
From 2025, the number of international students will be reduced to 270,000 per year, as part of a bid to reduce migration back to pre-pandemic levels.
The report said international student caps were needed to allow for the sector to grow sustainably in coming years.
Education Minister Jason Clare said moves for caps on specific courses would only be a reserve power.
"There are good arguments for why a power like that is needed in the private debt space," he told AAP on Thursday.
"Where there are courses which don't lead to a real qualification, we're able to cap the number of people that commence those courses. But there is also an argument that is not needed at universities."
The federal government has said it would examine the findings of the Senate report closely before the laws were legislated.
While the coalition supported the caps, the opposition said in the report the scheme was "riddled with incompetence".
It comes as Universities Australia warned failure by the federal government to remove a controversial immigration order could lead to the sector losing millions of dollars.
Known as ministerial direction 107, the immigration rule prioritised visa processing for students at tertiary institutions where international students were more likely to graduate.
The sector had taken aim at the direction due to the increase in visa refusals at a number of universities, but the order will be replaced by the student cap.
While Universities Australia had previously spoken out against a cap on international students, its chief executive Luke Sheehy said the removal of the direction needed to come sooner.
"This is a cap by stealth that is damaging not just the national economy, but it is also causing serious financial harm to our universities, particularly those in outer suburban and regional areas," he said.
"Every day (the direction) is in place, Australia loses $19 million. This can't go on."
The Independent Tertiary Education Council Australia said the caps would be damaging to many institutions.
"The Australian government looks set to proceed with a cavalier disregard for the employees in the sector that will lose their jobs," chief executive Troy Williams said.
