In an address to the Australia India Institute, Maxine McKew, a former MP of ruling Labor party and a supporter of ex-Premier Kevin Rudd, said the plan to tighten the eligibility of the 457 visa programme marked a "return to the worst of Labor's past".
The 457 visa is the most commonly used programme for employers to hire temporarily skilled overseas workers to work in Australia.
"We pay lip service to the idea of an integrated knowledge economy, but we want it on the cheap," she said.
"Perhaps most perverse of all, and quite contrary, it seems to me, to the whole spirit of the Asian Century paper, has been the Government's unnecessary obsession with 457 visas for skilled workers in Australia."
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"In the case of India the vast scale is always mentioned - the largest pool of young people in the world needing training - as if there is a neat equation between that reality and how we in Australia can profit from it.
"No doubt there were professionals and others here in this country - on 457's - from India, Indonesia, the Middle East the Philippines- who would have felt either insulted or that they were not welcome - when this issue was raised," she cited.
She said that if Australia wanted more young people from overseas then they should feel welcome and not be the butt of political point scoring.
She also criticised government for cutting down 2.3 billion funds for higher education finance stating that it was again undermining the efforts to work on likes of latest Asian century paper.
Commenting on the ties with India, she said the "reversal of the decision on uranium sales, the Prime Minister's visit last year, a solid export trade in commodities and education, investment growth on both sides, were all pointing to a deepening bilateral relationship.