The announcement comes after a review of existing laws by an independent legal expert, Stephen Howells, who found the problem has been fed by a lack of effective deterrents.
Howell's report estimates there are currently at least 50,000 illegal workers in Australia and potentially more than 100,000.
Although the number is proportionately small - 0.2 percent of the 22 million population compared with 3.5 percent in the United States - the government's move comes amid a slowing economy that has led to mounting job losseernment will hold consultations with businesses before amending the law.
Refugees from Asia and the Middle East who come by boats seeking asylum are not part of this problem, noted the report. Rather, the illegal workers arrive by air on tourist, business, working holiday-maker and student visas, and take up work.
The report did not give the nationalities of illegal workers.
Most employers are law abiding, but a small number of employers and labor suppliers, particularly in industrial and services sectors, use illegal workers as a cheaper source of labor, it said.
In the US, employers caught after their first offense are fined $275 to $2,200 for each illegal worker hired. Three or more offenses can lead to fines of up to $11,000 for each worker.
