In a possible amendment as proposed by a former Liberal leader, Australian colleges could be asked to restrict the number of foreign students intake apart from limiting enrolment from a single country.
In a review paper released on Wednesday, which was a part of a review of the education sector conducted by former Liberal MP Bruce Baird, it was suggested "a heavy concentration of international students, particularly from a single country" could lead to a poorer student experience.
"And the review was an opportunity to consider whether a regulatory mechanism for ensuring diversity would be desirable," it was said, according to The Age today.
Baird's suggestion, however, failed to receive positive response from various quarters of Australian education industry, the daily noted.
According to Andrew Smith, chief executive of Australian Council for Private Education and Training, such an amendment was not needed.
"We've got a pretty robust set of standards at the moment and what we need to concentrate on first of all is making sure we enforce those standards properly, before we start looking for new rules," he said.
"The other thing that we have to be very careful of is getting too far into the business of dictating to people how they will operate their business," he added.
Glenn Withers, chief executive of Universities Australia, which represents 38 universities, said a lack of diversity was not often a problem for universities, but the problems in other parts of the industry had the potential to damage Australia's international reputation as a study destination.
Withers said the review should consider "lighter touch" approaches, such as college partnerships, work experience and social activities, to enable different students to mix, before creating new regulation.
International education is worth about $ 15.5 billion industry in Australia, and it is the nation's third-largest export industry after coal and iron ore.
Local media Down Under has attributed the reported declining trends in student enquiries from India to negative publicity about violent attacks on international students, particularly Indians, and allegations of corrupt practices by some colleges have sparked fears about the sector's future.
Currently Victorian Premier John Brumby and State Skills Minister Jacinta Allan will spend the next ten days in India to promote Melbourne as a reputable destination for foreign students.