Confidential Department of Immigration files show widespread fraud and illegal migration committed by people flying to Australia is being unchecked while the government focuses on boat arrivals, a Fairfax Media report claims.

Theleaked documents reportedly contain multiple warnings visa fraud which "remains largely untreated" by the Australian government.

Among the most disturbing revelations was that as many as nine out of 10 skilled migrant visas granted to Australia may be fraudulent.

The papers highlighted a number of serious concerns about the department's ability to monitor migration into the country and police illegal activity.

An investigation in 2009 into a Somali people-smuggling cell in Melbourne linked to a terror suspect was allegedly shut down because of "a lack of resources".

The report also revealed that there were so many holes in the department's processes that it was "generating the fraud" and that the department's investigative division had "collapsed".