CANBERRA - Australia's largest business group has warned that the government's plan to cap international student numbers at universities will damage the economy.

The Business Council of Australia (BCA), which comprises the chief executives of more than 100 of Australia's biggest corporations, on Wednesday said cutting Australia's international student intake will hurt the economy without fixing the country's housing supply shortage.

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The governing Labor Party in May revealed plans to cap the number of new international students allowed to enroll at universities as part of a broader strategy to cut Australia's record-high intake of migrants.

In a submission to the government on the proposed cap, the BCA said it could damage Australia's reputation as an international education provider and the overall quality of the higher education sector.

According to government figures, international education was worth AU$47.8 billion (about $31.9 billion) to the Australian economy in 2023, making it Australia's fourth-largest export behind iron ore, coal and natural gas

"Our economy is grinding to a halt, and we are concerned the government is about to make the wrong short-term decision by cutting international students, which will have a lasting long-term negative hit to the economy, impacting all Australians," BCA chief executive Bran Black said in a statement on Wednesday.

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He said international students mask the real discussion about addressing bottlenecks in the construction of new homes.

According to government figures, international education was worth AU$47.8 billion (about $31.9 billion) to the Australian economy in 2023, making it Australia's fourth-largest export behind iron ore, coal and natural gas.

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The government on Monday announced that, effective immediately, the visa application fee for international students applying to study in Australia has been more than doubled from AU$710 to AU$1600.