AUSTRALIA risks losing some of its appeal to the foreign-born postgraduate students on which it has become so heavily dependent, according to Universities Australia chief Glenn Withers.

Dr Withers said unintended consequences of skilled migration reform could make it harder to recruit and retain onshore internationals.

Last month the HES reported an analysis by Monash University's Bob Birrell showing the lion's share of growth in PhD starts between 2002 and 2008, especially in the natural and physical sciences and engineering, was among overseas students.

But Dr Withers said the priority given to employer-sponsored skilled migrants could make it harder to attract PhD candidates from overseas.

"That is squeezing the independent category, where our PhD students, and indeed many of our undergraduates, choose to apply," he said.

Government rhetoric suggests the independent category will be made more PhD-friendly but there are expected to be few places available because employer-sponsored migrants will have first priority.

Dr Birrell said the prospect of permanent residency as skilled migrants was a big factor in the onshore international PhD market.

Lack of growth in domestic PhDs, and the demand for "journeymen scientists" to staff labs, together created an incentive for universities and other research agencies to sponsor internationals, he said.

But Dr Withers said universities lacked the career structure to offer overseas PhDs the jobs necessary to sponsor a skilled migrant. A typical postdoctoral position funded by a three-year project grant from the Australian Research Council was not enough to qualify, he said.

"Secure follow-on employment for doctoral graduates in universities is hard to guarantee because of the long-term decline in public funding for core teaching and learning," Dr Withers said.

In February, speaking at the Australian National University, Immigration Minister Chris Evans announced a reform of skilled migration emphasising employer sponsorship, job readiness and English language proficiency.

Dr Withers welcomed the new emphasis on advanced skills in the independent category but, as Senator Evans acknowledged in his speech, this category would lose places as employers took priority.

"It would be all too easy to get this wrong and undermine the ability of universities to properly equip the domestic workforce with advanced skills," Dr Withers said.

Science Minister Kim Carr said he was troubled by the weakness of the domestic PhD and hoped the new research and development tax credit would encourage many more PhDs in the private sector. "In Australia we don't have an entrenched culture of valuing the PhD as part of our skilled workforce . .. [but] the fact remains that a PhD student is an extremely valuable person to have on staff . . . in terms of productivity," he said.