The Prime Minister will encourage skilled migrants to live and work in country towns in a bid to ease congestion in major cities.

Key points: The plan cuts the permanent migration program from 190,000 to 160,000 places per year

The plan cuts the permanent migration program from 190,000 to 160,000 places per year Migrants will be given incentives to move to and stay in regions

Migrants will be given incentives to move to and stay in regions The Opposition has described the plan as "smoke and mirrors"

As part of the Government's new national population plan announced on Tuesday, two new regional visas will be introduced requiring skilled workers to live outside major cities for three years before they can apply for permanent residency.

Scott Morrison claims regional businesses need workers to fill vacancies.

"We're only talking about people going into places where there is the jobs and opportunities," he said.

"We have a lot of shires around the country saying to us we want people."

The plan includes 23,000 regional visas for skilled migrants.

Cities Minister Alan Tudge said after five years, 80 per cent of newcomers who came to regional towns tended to stay.

The overall cap of visas in the permanent migration program is set to be lowered to 160,000 places each year.

Although the previous cap was 190,000, only 163,000 visas were granted last year.

Mr Morrison said it would help ease congestion.

"This plan is about protecting the quality of life of Australians right across the country," he said.

But Opposition Leader Bill Shorten said the policy failed to address infrastructure issues and would not have a significant impact.

"This is smoke and mirrors," he said.

Mr Shorten said the Government had also ignored high numbers of temporary visas.

Growth in people living in Australia has been driven more by temporary visa holders including students and tourists than permanent migrants in recent years.

The Government will also try and lure domestic and international students to attend regional universities with 1,000 scholarships worth $15,000 each.