The Turnbull government will abolish the 457 visa program, replacing it with a new system that imposes tougher requirements on businesses looking to employ foreign workers.

Announcing the news first on Facebook, Prime Minister Malcolm Turnbull said 457 visas would be replaced with the new Temporary Skills Shortage Visa, “specifically designed to recruit the best and brightest in the national interest”.

“The new visa will better target genuine skills shortages, including in regional Australia,” he said.

“It will include new requirements, including previous work experience, better English language proficiency and labour testing.”

Speaking to reporters on Tuesday, Mr Turnbull said the current system had “lost its credibility” and would be replaced by two new visa streams – a two-year and a four-year visa.

The four-year visa would require a “higher standard of English” and a police check, he said.

“It will require in almost all cases – the majority of cases – mandatory labour-market testing,” Mr Turnbull said. 

“For those people here on a 457 visa at the moment, there will be a grandfathering arrangement. They will continue under the conditions of that visa,” the Prime Minister added. 

“This is about putting Australians first for Australian jobs.”

The government will also create a new training fund to help fill skills gaps, to which employers will be expected to contribute, while more than 200 jobs will be removed from the occupations list.

Immigration Minister Peter Dutton said the current 457 system was “open-ended” and resulted “in many cases in a migration outcome”.

That meant “somebody going into permanent residency and becoming a citizen”, which was a “significant part of the attraction to using the 457 visa”, he said. 

The new two-year visa would not not allow permanent residency, Mr Dutton said.

The announcement comes as the Turnbull government ramps up its attack on Labor leader Bill Shorten whom it has labelled the “Olympic champion” of 457 visas.

Immigration Department figures show there were 95,758 foreign workers on 457 visas as of September 2016.

The four-year visa was designed to fill gaps in skilled labour but has widely criticised as too accessible.

Last month, the government announced a crackdown on visas issued for workers at fast food restaurants.

In response to the announcement, Labor said it was “concerned that Mr Turnbull is just rebadging the same visa system with the same dodgy loopholes”.

“We’ve been pushing for changes to the working visa system for a long time – both before the last election and in the parliament,” the opposition’s immigration and employment spokesmen said in a joint statement.

Mr Shorten also responded on Twitter: “make no mistake, the only job Malcolm Turnbull cares about saving is his own”.

The opposition has promised a 457 visa crackdown under a future Labor government.

One Nation leader Pauline Hanson, a vocal critic of immigration, claimed credit for the move, saying the government had adopted the new visa “because of One Nation”.

The Greens slammed the move as a “racist dog whistle”.

“Malcolm Turnbull’s announcement to scrap 457 visas sounds more like a dog whistle than a genuine policy to grow jobs for young Australians,” Greens Senator Sarah Hanson-Young said.

Key senate crossbencher Nick Xenophon welcomed the changes, but warned an increase in skills training was also needed.

“We need to re-fund skills training in this country urgently so we don’t have these “critical skills shortages” in the first place,” he said.