Australia will increase its annual migration intake to 300,000 people a year - the biggest rise since the end of World War II. The increase in the annual quota is intended to address the country's chronic skills shortages. From Sydney, Phil Mercer reports.

Australia's booming economy does not have enough qualified workers and immigration has become an important economic tool.

This year 300,000 permanent and temporary migrants will be allowed to settle in Australia. Just over 133,000 skilled workers will be allowed in, and about 13,000 refugees will be granted visas.

The government also plans to test a new program to recruit unskilled workers from the South Pacific.

For years, governments of Pacific island nations have urged Australia to allow islanders to plug gaps in its labor force.

Economic necessity has prompted Canberra to finally relent. Many Australian companies simply do not have enough staff, and that could stunt economic growth.

Under the new test program, islanders would be recruited on a short-term basis, particularly in seasonal industries such as fruit picking.

Associate Professor Richard Brown, who studies migration issues at the University of Queensland, says the plan would benefit everyone.

"Our argument is by opening up the Australian labor market to unskilled migrants from the Pacific islands a) we would alleviate certain bottlenecks in the supplies in both skilled and unskilled areas and b) we would be making a significant contribution to the development of the island economies especially in terms of poverty alleviation," Brown said.

There are concerns too that high levels of unemployment in the South Pacific could contribute to political instability.

Under a pilot program New Zealand will grant visas to 5,000 guest workers this year.

The Wellington government hopes the initiative will help the economies of the Pacific island nations and make them less reliant on aid from Australia and New Zealand.