AUSTRALIA is so addicted to its living standards that it will have to embrace an expansion of overseas students as long-term residents or face unpalatable cuts to services, demographer Bernard Salt has warned.

"Without question it's in Australia's best interest and the interest of every baby boomer looking for a comfortable retirement - and someone to fund it - to be right behind the student migration program," Mr Salt told the HES.

The KPMG partner will take this message to next week's Australian International Education Conference in Sydney, which comes at a crucial time for Australia's troubled $15billion overseas student industry.

Mr Salt said Australia's tax base would face unprecedented erosion from 2011, as the first baby boomers reached 65, pushing up demand for aged care pensions and health care, while more Australians left the workforce than joined it.

The challenge of shoring up the country's financial base would be compounded by the need to pay back the debt incurred in shielding Australia from the worst effects of the global financial crisis, he said.

Increasing taxes for generations X and Y or reducing baby boomers' access to support services were unrealistic alternatives, according to Mr Salt.

"We don't have the political will or stomach to make the hard choices on tax increases or funding cuts," he said. "We have become addicted to certain levels of funding and service that we won't relinquish."

Instead, recruiting migrant workers and overseas students should be a growth industry for the next 20 years.

Despite outlining the optimistic new rationale for an industry that has been criticised over the quality of its service delivery at the bottom end of the vocational market, Mr Salt declined to recommend a suitable level of overseas student recruitment.

"The tax base is never large enough and the student contribution is only part of the solution," he said.

"But 400,000 students is better than 200,000, (although) it's not as good as 600,000."

There are about 400,000 overseas students in Australia and about 20,000 of them win permanent residency every year.

Mr Salt pointed out that Australia would be competing with other Western nations for the net addition of 180,000 migrants a year - up from 110,000 a year - at the heart of its revised population projections.

He predicted that as a consequence of the overseas student program, Chinese and Indian influence would change the look of Australian suburbs just as Greek and Italian migration did in the 1970s.

By the middle of the next decade, many of today's Chinese and Indian students would be well settled and keen to flaunt their middle-class prosperity, Mr Salt said. "We will see whole suburbs and precincts reflecting their Australianised values, perhaps with dwellings reflecting feng shui and Hindu-type design principles."

He challenged research showing poor occupational outcomes for present overseas students, and suggested research programs that tested occupational outcomes three years after graduation would reveal better alignments of student discipline choice and eventual occupation.

Australia also had to better manage pressures associated with burgeoning overseas student numbers, such as affordable accommodation, rapid growth of cities and public relations issues triggered by violence against students, he said.