The government of Prime Minister Malcolm Turnbull has adopted a new "Australians first" approach to skilled migration, announcing it will abolish the controversial 457 visa programme for temporary skilled migrants.

The 457 visa programme is used mainly to hire foreign workers in the restaurant, IT and medical industries and the majority of such visa holders came from India, Britain and China, the Sydney Morning Herald reported on Tuesday.

According to government statistics, 95,758 people were living in Australia on 457 visas last year, with the highest proportion coming from India (24.6 per cent), followed by Britain (19.5 per cent) and China (5.8 per cent).

Prime Minister Turnbull said it would be abolished to prioritise the recruitment of Australian nationals.

"We are putting jobs first, we are putting Australians first," he said. "We are an immigration nation, but the fact remains that Australian workers must have priority for Australian jobs." 

Stating that Australian workers must have priority for Australian jobs, he said: "We will no longer allow 457 visas to be passports to jobs that could and should go to Australians." 

The scheme will be replaced by two temporary visas that will impose tougher English language tests, stricter labour market testing, at least two years of work experience and a mandatory police check.

The numbers of jobs eligible for the two-year and four-year visa streams will be slashed, with 216 occupations ranging from antique dealer to fisheries officer to shoe maker, cut from a list of 651 professions on the list.

Accounting giant KPMG criticised the decision, saying "there is no evidence the current system is not working".

However, Turnbull dismissed that claim, arguing the abolition of the 457 visa was "a decision of my government... this has been a careful exercise in policy development".

People currently on a 457 visa, which lasts for four years, will be exempt from the new regulations.

Immigration Minister Peter Dutton said that for the two-year stream, which could be renewed for two years, "there won't be permanent residency outcomes at the end of that". 

"In relation to the medium-term stream which, as the Prime Minister pointed out, is targeted at higher skills, (there will be) a much shorter skills list".

He said the government would work with companies to ensure they met labour market testing requirements, and warned "there will be a particular focus on companies that have an unnecessarily high proportion of 457 or foreign workers in jobs as well. There will be a number of ways in which we can clamp down". 

The 457 programme was introduced by the former John Howard government in 1996-97. 

Turnbull said that it had failed under Labour and would therefore be abolished.