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THE controversial 457 visa system for temporary foreign workers is booming, outstripping growth in permanent employer-sponsored jobs and returning better salaries as well.

The Immigration Department's annual report released yesterday has revealed use of the temporary visa - historically reviled by unions - has surged under the Gillard government, up a third during 2010-11.

"Emerging skills shortages, posing a risk to business growth in some parts of the Australian economy, have increased demand, resulting in the strongest year on record for the subclass 457 visa program," it said.

The revival in fortunes of the demand-driven, uncapped visa scheme comes after its numbers slumped by a third in 2009-10, in the wake of the global financial crisis and a government crackdown on low wages and substandard conditions.

In industries such as construction, the turnaround is even more pronounced, up 78 per cent last financial year.

Unions, however, remain unhappy with the resurgence of the 457 visa, with the ACTU last week pushing for new limits on its use to force companies to train local workers instead.

They have also campaigned against exploitation of short-term foreign workers, yet the number of employers monitored, visited, sanctioned, warned or referred to other agencies by the Immigration Department fell in 2010-11 for the third year running.

Total 457 visa grants - including those issued to dependants - hit 90,120 last financial year, rivalling the 113,725 visas issued under the government's priority program for permanent skilled migration.

Demand for Canberra's preferred option - employer-sponsored permanent places - dropped in the same period, with applications lodged down more than 10 per cent. And permanent, employer-sponsored jobs now also pay much less, offering about $20,000 less than the average nominated base salary of $86,800 for a 457 visa holder.

The annual report also highlighted the difficulty in responding rapidly to Australia's changing economy via the permanent skilled migration scheme, which is constrained by caps, longer lead times and greater red tape.

Tasmania, for example, reported five times the growth in its state government-sponsored permanent skilled migration places than the boom state of Western Australia.

In other parts of the migration program, the number of foreigners on student visas continued to plummet, down 13.1 per cent on 2009-10. Indian student numbers took a 36.5 per cent hit, partly because of their over-representation in the vocational education sector most exposed to immigration rule changes and crackdowns on student visa rorts. 

Siobhain Ryan

• October 15, 2011