Australia’s reliance on temporary migration is creating a new economic underclass that risks having a “corrosive” effect on the nation’s society, Labor’s shadow home affairs minister, Kristina Keneally, says.

In a major speech to the Curtin institute on Thursday night, Keneally will step up Labor’s attack on the government for its reliance on temporary migration, saying current trends could see as many as 3 million people – or 12% of the population – living in Australia on a temporary basis.

Pointing to figures that show the number of temporary migrants has doubled since 2007 to 1 million people, or 4% of the population, Keneally says the trend will continue, despite the government’s focus on cuts to the permanent migration program.

Before the May election, Morrison announced the government would cut the permanent migration program from 190,000 places to 160,000 places, saying the government wanted to address concerns about rapid population growth in congested cities.

But Keneally said the move belied the fact that Australia’s population would continue to grow strongly on the back of temporary migration numbers.

“So this is the Morrison wink and nod – tell Australians that you are capping permanent migration, make Australians feel like the government is doing something to address their concerns about congested roads and crowded cities,” a draft copy of Keneally’s speech says.

“But, in fact, this is just another ad man’s trick from the ultimate ad man, Scott Morrison [and] what the PM will never admit is his cap on permanent migration cap sits alongside a significant surge in uncapped, temporary migration.

“There are going to be more people, but the big difference is, these people won’t be here permanently – we are not inviting them to stay.

“That will change who we are as a nation, and not for the better.”

According to the 2019-20 budget, the rate of total overseas migration shows a 17% increase, despite the permanent visa reduction compared to the previous year, ranging between 260,000 and 270,000 a year over the forward estimates.

This is about asking our fellow Australians if we want to create – and profit from – an economic underclass

Keneally said the government was “desperate” to appear to be cutting the migration intake, but couldn’t risk disappointing the business community, “which always wants increased migration to support economic growth”.

She points to findings from the OECD that show Australia is home to the second largest temporary migrant workforce in the world, behind only the US, and an international student cohort that, if measured as a share of the working population, is the largest in the world.

She says that, according to OECD estimates, temporary workers in Australia account for the equivalent of 200,350 full-time jobs, or 1.6% of our total workforce.

The number of migrants – including New Zealanders – on temporary visas has jumped from 1.8 million to 2.2 million in the past four years.

She says there are estimates that suggest temporary migrants now make up 10% of the younger-aged workforce, and that 4% of Australia’s work force is made up of “low-skilled, young, temporary migrants”.

Keneally says the “significant surge” in temporary migration risks a “new and damaging form of social and economic exclusion”, with temporary workers often exploited through labour hire firms and targeted by international people smuggling rings.

She also argues that the influx has led to stagnating wages across the country more broadly, with the demand for a temporary workforce being driven by large business interests.

“Many people believe the Australian migration system is highly skilled and has nothing to do with the underemployment or minimum wages. In the past this was true, but it is changing – and changing quickly all because of the reliance on temporary migration this government is exacerbating,” Keneally says.

The New South Wales senator says Australia will be “fundamentally different” if 3 million people living in Australia “have no stake and no say in the future of our country”, comparing it to the country’s historical success as a cohesive multicultural nation.

“In the name of lower wages and cheap labour, this government is risking a new and damaging form of social and economic exclusion,” Keneally says.

“A new instrument of division, a new sense of who is in and who is out, who belongs and who doesn’t. It will diminish our sense of unity – and community. It will create a two-tiered labour market; it will undercut wages and conditions, and I fear it will give new weight and new prominence to anti-immigrant sentiment, resentment, racism and xenophobia.”

Keneally says while the government has been fixated on asylum seekers arriving by boat, people smugglers were now having “stunning success” by shifting their business model to the air, with over 100,000 airplane arrivals in recent years.

“Under this government, the people exploitation business is booming. It’s booming because there are dodgy labour hire companies and unscrupulous employers who see exploitation as a cost-cutting tool.

“And it’s booming because Scott Morrison and Peter Dutton care more about the rhetoric of strong borders than they do about the reality of a temporary visa system in crisis.”

She said Labor strongly believed in a nation “made great by permanent migration”, and it needed to be defended amid the rise in temporary migration.

“This is about asking our fellow Australians if we want to create – and profit from – an economic underclass.

“This is about whether we want to stop people working in Australia from putting down roots, raising a family, starting a business, creating ties with their neighbours through sport, volunteering, church or community?”