Alarmed bureaucrats told him the publicity surrounding his report had attracted the attention of the world's media and damaged the reputation of Australian universities.

The alarm was understandable. After all, nearly 400,000 foreigners are enrolled in Australian education programmes on and offshore - up from a mere 5000 in 1986 - and they contribute an estimated $12 billion a year to the national economy. The money they pay in tuition fees represents the universities' largest source of private income.

In the study, Professor Birrell analysed English test results compiled by the Australian Immigration Department. Since 2004 the department has required foreign students graduating from Australian universities who want to stay on as permanent residents to take an English test.

He found that more than a third of the students granted permanent residency did not have sufficient command of the language to justify university admission, let alone earn a degree.

Of the students tested in 2005-06, more than half of those from Korea and Thailand failed to demonstrate adequate command of the language, as did 43 per cent of mainland students and 17 per cent of those from India and Singapore.

Then Education Minister Julie Bishop accused Professor Birrell of making an 'extraordinary attack on universities' but all he had done was imply what many academics already knew: universities were giving fee-paying students with poor English an easy ride to graduation.

In his report, he said there was a 'mountain of anecdotal evidence' showing that many overseas students struggled to meet their university course requirements. Universities coped by lowering English demands, and in subjects such as accounting and IT, lecturers focused on problems not requiring essay writing skills, or by setting group assignments.

Tracey Winch, an academic at RMIT University in Melbourne, wrote recently that a mood of 'resignation' had settled over the academic community and segregation and cultural cliques among foreign students continued to flourish.

'Rarely do international and local students mix; rarely do they want to,' she said. 'In my experience, local students feel international students are treated softly: given extra time for assignments and marked more leniently.'

But the foreign students have told her they feel like 'second-class citizens' and call themselves 'cash cows'.

'Students from Asian countries, who account for more than two-thirds of the international cohort, have the worst time,' Ms Winch said. 'They are exploited by greedy landlords, are victims of racist taunts and are even barred from many city night clubs... Many are frightened and intimidated and it is no wonder they prefer the company and safety of their own.'

She said the response from universities had been piecemeal and inadequate.

'We've had well over a decade to get this opportunity right and yet the best the universities have come up with to bridge the cultural divide is running fried rice days and a few satay stalls in the quadrangle.'