Australia's federal government plans to change immigration rules to make it easier for foreign students to remain after completing their studies as part of an effort to address a growing brain drain.

More than 17,000 young Australians left the country to work overseas last year. Now prime minister John Howard says there is a need to attract the world's "brightest and best" to Australia, either on temporary visas or as permanent residents.

Mr Howard said new rules would be announced next month as part of a forthcoming policy on innovation. The aim would be to encourage more foreign students with valuable skills to stay after graduation, and to tap into the pool of global information technology experts.

Mr Howard said it was "heartbreaking" to see good ideas in Australia sold overseas because business was unwilling to invest in them. "We want the brightest and best not only to stay here but also, where possible, the brightest and best from around the world to come here," he said.

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Under existing immigration regulations, foreign students who want to stay must first return to their home countries and apply from there. Changes made last year mean foreign students can apply for permanent residence in the first six months after completing their university courses.

Computing graduates are virtually guaranteed acceptance as they receive maximum points for skills. Some 1,000 foreign students were expected to seek permanent residence visas this year.

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Business leaders have been pressing for the relaxation of immigration restrictions to boost high-tech industries. David Hale, an economist with Zurich Financial Services in Chicago, said Australia's investment in high technology compared with that in North America was weakening the Australian dollar.

He said overseas investors had little reason to put their money in Australia, in contrast to America's Silicon Valley, where half the workers with PhDs are from Asia.

Monash University sociologist Bob Birrell said more than half the increase in the output of degree-level computing professionals during the 1990s was due to overseas students.