The Federal Government is likely to cut Australia's permanent migration cap, in a move it says will ease congestion in the major cities.

Key points: Prime Minister forecasts a 30,000 cut to annual permanent migration cap

Prime Minister forecasts a 30,000 cut to annual permanent migration cap Government concedes cutting migration will take a financial hit to the budget

Government concedes cutting migration will take a financial hit to the budget Doubts raised that major city congestion will ease if migration is cut

Prime Minister Scott Morrison, in a speech on the future of Australia's cities, said Sydney and Melbourne had been overwhelmed with population growth.

"The roads are clogged, the buses and trains are full, the schools are taking no more enrolments," he said.

"I hear what you are saying, I hear you loud and clear.

"That's why we need to improve how we manage population growth in this country."

It remains unclear what impact a cut on permanent migration would have on city congestion, given intake levels are already well below the current cap of 190,000.

"We're running 30,000 below where it has been and it wouldn't surprise me if any process we went through would arrive in that sort of territory," Mr Morrison said.

Labor frontbencher and former population minister Tony Burke said reducing the cap would not fix congestion problems.

"At the moment, the actual [permanent migration] numbers have been much less than the cap anyway," he said.

"So reducing the cap closer to actual numbers won't make a difference in terms of people's lived experience.

"What will make a difference in people's lived experience is if we can finally act on infrastructure."

Just hours before Mr Morrison made his comments, Defence Minister Christopher Pyne had warned against cutting immigration levels.

He said the solution was moving migrants away from Sydney and Melbourne and into regional areas, something the Federal Government could achieve through "policy settings".

"We don't need to put a handbrake on population growth," he told Sky News.

"We need to manage our population growth sensibly in a country which quite frankly can take a lot more than 25 million people."

Mr Morrison said he would ask state and territory leaders at a meeting in December how many migrants their jurisdictions can realistically take.

He has previously indicated the states were best placed to determine their capacity for future growth.

"My approach is to actually get away from top-down discussions about population to set our intake cap, and get into a discussion from the bottom up," he said.

"Now I believe this is likely to end in revising down the permanent migration cap in Australia; that would be my expectation."

But Mr Morrison said he did not want to inadvertently disadvantage states like Tasmania that want more migrants, and praised migrants for the role they play in supporting Australia's ageing population.

Sorry, this video has expired MP Alan Tudge discusses the likely cuts to the immigration intake in Australia

Doubts migration cuts will ease congestion

Melbourne University professor of demographics Peter McDonald warned a 30,000 cut to permanent migration would do little to ease congestion.

"If you cut 30,000 migrants to Australia — say 15,000 to Sydney and 15,000 to Melbourne — that would make absolutely no difference to congestion in Sydney and Melbourne," he told the ABC's AM program.

"You've got to deal with the congestion, which is caused by the infrastructure delays. And we're actually doing that. We're investing quite a lot in infrastructure in Sydney and Melbourne.

"But infrastructure takes a long time to develop, it's four or five years. And while it's being done, of course, you get the congestion due to the building of the infrastructure."

Professor McDonald said cutting permanent migration would also exacerbate existing shortages with labour supply.

Federal Cities Minister Alan Tudge said a reduction in the permanent migration intake would mean a hit to the budget.

"Yes there is a fiscal impact on the budget, but there's also impacts in terms of congestion and liveability which people, particularly in Melbourne and Sydney, are facing right now," he told RN Breakfast.

Mr Morrison, speaking as the treasurer earlier this year, warned cutting permanent migration by 80,000 could cost the budget up to $5 billion over four years.