THE Federal Government today said it would allow 9500 temporary protection visa (TPV) holders to apply to stay in Australia permanently.

Immigration Minister Amanda Vanstone said the TPV holders would not have to leave the country in order to lodge their applications for permanent residency.

"This decision ... recognises the fact that many TPV holders are making a significant contribution to the Australian community, particularly in regional areas," she said.

Senator Vanstone denied the move would encourage people smugglers to target Australia as a destination, saying the Government remained serious about border protection.

Opposition leader Mark Latham accused the Government of pinching Labor policy announced in January.

"We urged this policy on the Government at the Labor Party's national conference and Mr Howard pooh-poohed it at the time, said it wouldn't be possible, and had all sorts of criticism," Mr Latham said.

"The fact that he is adopting Labor policy is a good thing and goes in a long pattern – from parliamentary superannuation to baby payments, pneumococcal vaccine, childhood obesity, abolition of ATSIC and other agendas.

"So we are running up a long list of areas where the Howard Government has been adopting Labor policy."

The three-year TPV was introduced in 1999 in response to a surge of unauthorised boat arrivals.

The new arrangements would also apply to offshore temporary humanitarian visa holders, Senator Vanstone said.

She said today's developments were a major step forward for the holders of TPVs.

"Not all of them, of course, will get them (residency) but they will be able to apply and they won't have to go offshore in order to do so."

With several thousand TPV holders already in a position to apply for permanent protection, today's move means they can concurrently try to gain more than one type of permanent visa.

In addition, the Government also announced a new return-pending visa for those who fail in their efforts for permanent residency.

Senator Vanstone said the return-pending visa would give people 18 months to make their own departure arrangements, while still receiving the same Medicare and work rights benefits in line with their TPVs.

"We don't see the need to make them rush home, in fact we see the need to give them the opportunity to make decent and co-ordinated arrangements to return home," she said.

Senator Vanstone denied the Government was softening its stance on the contentious immigration issue of immigration in the lead-up to the federal election, thus sending the wrong message to people smugglers.

"As government policy changes, it needs to reflect the changed situation," she said.

"And we're now in a situation where we've brought border protection pretty much under control."