The study, by Bob Birrell, director of Monash University's Centre for Population and Urban Research, focused on overseas students who were tested after applying for residency.

The results of the research have raised questions about how those with limited English gained entry to Australian higher education courses in the first place and how they subsequently passed their examinations.

Australian Prime Minister John Howard said he was concerned that an average of 34 per cent of graduating students who were granted permanent residence did not have English skills good enough to justify university admission, let alone pass a degree.

'I will be getting advice from the vice-chancellors and from my Education Minister as to how accurate they and she believe the research to be,' he said.

Education Minister Julie Bishop said the government would introduce changes in July to lift the minimum level of English needed to become a permanent resident to band 5 on an IELTS test.

An estimated one in three of Australia's 239,000 overseas students are expected to apply for a skilled migrant visa once they graduate, according to research by Dr Birrell.

Yet he said there was 'a mountain of anecdotal evidence' showing that many overseas students struggled to meet their university course requirements.

'Universities cope by lowering the English demands in the courses they teach. In subjects such as accounting and IT, lecturers focus on problems not requiring essay writing skills, or by setting group assignments where students with better English help out.'

The Australian Vice-chancellors' Committee rejected suggestions that universities dropped their standards so they could collect fees from foreign students.

But the committee's claims were disputed by academics and counsellors working with international students. Moses Khor, a student counsellor for seven years with a Melbourne university, said the situation was 'absolutely scandalous'.

'Having worked as a counsellor and witnessed the struggles many of these students have with English, I have to express my disgust at the appallingly mercenary attitudes of the universities in allowing students with such poor English skills to enrol,' Mr Khor said.

'Many could speak barely coherent English so their Australian classmates routinely boycotted their class presentations and they could not get a single Australian on their project teams.'

He said that judging by the response of the Australian Vice-Chancellors Committee, it seemed nothing would be done to improve the situation.

The fees paid by foreign students now constitute the largest source of private income for universities and are expected to exceed A$2 billion (HK$12 billion) this year.

As Dr Birrell noted, if a particular university took unilateral action and required students to undertake remedial courses this would add to the fees the overseas students had to pay and would put the institution 'at a competitive disadvantage relative to the competition'.

Nevertheless, he said universities should require foreign students to undertake a formal English test before being admitted and then mandate supplementary English courses for students who lagged.

His proposal was endorsed by Australia's leading recruiter of foreign students, IDP Education Australia, which also urged universities to introduce English tests before students enrolled and when they had completed their degrees.

The director of teaching quality in the school of accounting and law at RMIT University, Associate Professor Kim Watty, said international students needed extra support staff to help with their English.