UNIVERSITIES, TAFE institutes and colleges are sweating on the release of the priority skills list likely to recast demand for their lucrative overseas student offerings and triggering an exodus home of large numbers of disappointed students.

But the delayed list from the Department of Immigration and Citizenship - aimed at decoupling education from migration - will come on top of a market correction that is distressing colleges and worrying universities in the $17 billion industry.

On the back of key enrolments figures, University of Melbourne migration visa expert Lesleyanne Hawthorne gave a big tick to the Rudd government's recent policy changes, saying they were "having the desired effect". The 13 per cent enrolment growth for universities during the past year was correcting the recent mass migration-driven shift to the vocational sector, she told the HES.

CQUniversity overseas student research director Paul Rodan said a slowing of growth at the bottom end of the market "would have positive potential implications". "It's not callous to be relieved that people who couldn't really afford to come may no longer come," he said.

Australian Council of Private Education and Training chief executive Andrew Smith said a market relocation was under way, moving to Australia's competitors, New Zealand and Canada. "Uncertainty and ongoing change in Australian policy, exacerbated by further delays in the release of the skilled occupation list, have left many students confused," he said.

As the independent category used by students was squeezed, having an occupation on the list was "a key determinant" for priority processing, Professor Hawthorne said.

Education agents - wary of recommending the Australian vocational education and training and English language markets over fears of student visa rejection - were referring clients to Australia's competitors, Mr Smith said. Students were withholding tuition fees until they saw the list.

One principal of a Brisbane college - who would not be named - said the college market was "imploding" as the strong Aussie dollar and other factors forced course cost slashing of up to 70 per cent during the past year.

"The downstream effect of this sector's decline will be felt in the other sectors over coming months," Mr Smith warned. A confidential Australian government cable obtained by The Australian's Michael Sainsbury in Beijing warned Australia's market share had dropped by 15 per cent to 20 per cent this year and was expected to fall by as much again next year.

A veteran overseas student hand, the University of NSW's Jennie Lang, told the HES the decoupling had to be "handled very carefully". "You can't just break that nexus," she said on behalf of Universities Australia. About one-third of overseas students in Australian universities consider migrating on graduation, UA has acknowledged for the first time.

Ms Lang made the comments as UA wheeled out big-gun arguments in its lobbying of the Immigration Department and Skills Australia, Education Minister Julia Gillard's adviser on the high stakes skills list. It was essential that the list aided universities' supply of graduates to Australia's $130bn resources sector.

Resources employed almost 500 engineering-information technology graduates last year, and almost 700 other graduates, UA told Skills Australia. It also warned if less skilled occupations were again entrenched in permanent residency rules, Australia risked resurgence of immigration-driven courses.

Thousands of overseas students - promised migration by their education agents - were hanging on the list to see if they backed the right course or could jump to another. About half of all students in cookery, hairdressing, accounting and IT courses would pull out of Australia if their courses weren't on the list, immigration agent Karl Konrad predicted.