WHEN Brisbane design engineer James Gao picked up the phone on Monday night, it was to hear the news he, his wife and seven-year-old son had been waiting for since June 1989. For the Gao family, the announcement that Australia is to allow the 28,500 students who sought refuge here at the time of the Tiananmen Square massacre, and in the two weeks after it, to stay, was the end of a nightmare. ''The government's decision is a big move,'' says Mr Gao, who came to Queensland University as a research fellow in 1988. ''I am very relieved. Now they are letting these Chinese students' lives go back to normal, so they can make a contribution to Australia. My life is clearer.'' But for Ling Zhang, a PhD student, and his wife, life is far from clear. They came in 1990 after the massacre, and want to stay for a mixture of lifestyle and political reasons. And although they fulfil the government requirements that the post-massacre students who will be allowed to stay speak good English, are under 45, and meet educational criteria, there is one more important requirement they do not meet: they had not applied for refugee status when the decision was announced by the Federal Minister for Immigration, Senator Nick Bolkus, on Monday night. ''We were doing our degree. We did not apply for refugee status because we thought there would be enough time,'' Mr Zhang says. ''A lot of my friends are in this position and these people doing PhDs would be some of the best representatives in Australia from China. It is ridiculous, we will fight very hard all the way through.'' Others, too, are lobbying for changes. Melbourne Chinese community leader Wellington Lee met Senator Bolkus yesterday morning, both to thank him for allowing the 28,500 to stay, and to urge the easing of the rules for those who came later. They should be prepared to learn English, but not to speak it fluently now. And those with small businesses that do not have three staff should be given the chance to hire them, he says. But Wellington Lee well knows the chances of change are slim. This government decision, one that will allow more than 37,000 people a permanent home in Australia at a time of recession and high unemployment, is a brave one. That it is tempered with restrictions Senator Bolkus says, derived from considering ''the national interest'', is hardly surprising. ''I thought it was the only outcome possible,'' says Mr Lee. ''They have messed these people around for four years and they just had to give them blanket residence. ''But they will probably get some criticism and they inherited this problem. [Former Prime Minister] Bob Hawke landed it in their lap. They deserve congratulations - for once, the government has listened to the consultation process with the community. THE ''problem'' Mr Lee says Mr Hawke landed the government with began when, weeping publicly at the tragedy in the square, he promised none of the Chinese students in Australia would be ''required to return to China against their will''. It was a promise the man who overthrew him, Prime Minister Paul Keating, repeated in March last year. No one would be forced back when their four-year visas ran out in June 1994, he said. It was a promise the students built their lives on. But attitudes change and in September last year, with the tabling of a report in Federal Parliament, the future for the students began to look bleak. That all-party report, the result of a two-year review of Australia's refugee system, recommended that from next June the students should lose their special status. Their applications for permanent residence should be considered along with all others, on a case-by-case basis - resulting, for tens of thousands, in deportation. It was a decision that split the committee: its chairman, Labour MP Dr Andrew Theophanus, told Parliament he disagreed with a recommendation that so clearly contradicted Mr Hawke's commitment. ''I cannot support such a drastic solution,'' he said. The Opposition backed the report, which echoed its long-held policy that the students' treatment was discriminatory, but the government, faced with a March election, gave no response. In March with the election came a new Minister, Senator Bolkus, who said he would take a recommendation to Cabinet, giving the students ''plenty of notice'' before June next year. For the students, it was a painful waiting game. Tao Chai, 24, ignored his father's advice not to get involved in politics in Australia and attended a rally protesting the June 4 killings. When the four-year visa and chance to stay was on offer, he tookit. But then came the report. ''Everybody knows people took these four years because they are scared of the Chinese Government and persecution,'' he said. ''But if they ask you: 'Why did you take that? You think the Chinese Government is bad, you caused us to lose face . . . Maybe they won't kill you, but the rest of your life you will lose a lot.'' The decision, which Senator Bolkus and Mr Keating are believed to have advocated, followed international precedent, with the US, New Zealand and Canada all providing refuge for the students who went there. Nonetheless, it was a brave one and one the ''redneck'' element was quick to denounce: it was outrageous, the Victorian president of the Returned Services League, Bruce Ruxton said. ''Chinese are steeped in the traditions of their own country, where human rights count for nothing. They are used to massacres, they are the norm in China.'' Ken Xu, the Sydney-based spokesman for the Alliance for a Democratic China, says it was not only ''a great decision'', it was a victory for democracy. Mr Xu says the decision is Australia telling the world it is not safe for the students to go back - but he admits the government won't interpret it that way. ''I believe they have an agreement with the Chinese government not to say that.'' He also knows not all the students faced persecution at home. For many the desire to stay was as much based on their new lifestyle, being settled here for many years, their children ''little Australians'', their earning power high. ''But a lot also face a certain level of persecution and punishment if they go back,'' he says.