VICTORIA will suffer a $2.6 billion hit to its economy by 2012 as international student numbers dive.

The drop is a result of tighter skilled migration rules that are torpedoing the state's once-booming, residency-driven market.

The stark numbers come as the International Education Association of Australia this week issued an open letter ahead of the state election warning that thousands of jobs are at risk.

It called for a campaign to promote the Victorian industry overseas and locally, and reiterated the need for travel concessions for international students.

"The downturn currently facing international education in Australia will result in the loss of thousands of Victorian jobs without an urgent joint effort by the education sector and the state and commonwealth governments to support the industry," IEAA said.

In a report commissioned by the Australian Council of Private Education and Training, Allen Consulting calculates the direct cost to Victorian industry of the forecast fall in student numbers at $652 million by 2012.

After including the indirect economic flow-on effects, the report estimates that Victoria's gross state product will have been cut by $2.56bn.

Broken down by industry, the accommodation, cafe and restaurant sector will take the largest hit at $250m, followed by retail trade at $244m and education $233m.

Allen Consulting is forecasting new international student commencements in Victoria to slump by 24 per cent by 2012, a drop of almost 24,000 students.

A spokesman for Victorian Education Minister Bronwyn Pike said the government had committed $14m to an international action plan to support the industry and students. But ACPET has called for a further $10m to be ploughed in.

IEAA executive director Dennis Murray said extending travel concessions would cost the state up to $35m a year, but represented only about 0.6 per cent of the export income currently brought in by international students.

But Ms Pike's spokesman said public transport costs were already heavily subsidised and exchange students and refugee students received concessions.