Australia's conservative government today reintroduced controversial temporary visas that will free thousands of would-be refugees languishing in detention centres to live in the community - but they may face deportation at the end of three years.

Thousands of people seeking refuge reached Australia by boat before the previous government instituted a hard-line policy to send such asylum seekers to third-party countries for processing and made them ineligible to settle in Australia.

That backlog, which includes hundreds of children, will now be able to leave detention centres in Australia and live for three years in the community, where they will have work rights and may eventually apply for skilled or other migrant visas.

If they don't get a permanent visa, they can be sent back to their country of origin.

The revised bill narrowly passed the upper house Senate early on Friday after a lengthy debate. Mining magnate Clive Palmer, whose party supported the bill after negotiating several changes, called the system the best option available.

"It's all very well for people to shake their head, but they're not locked up on Christmas Island, they're not behind bars, their children are not missing out on a decent Christmas dinner," he told reporters, referring to a detention centre on a remote Australian territory in the Indian Ocean.

The temporary visas, introduced under former prime minister John Howard, have been criticised by rights groups and the United Nations for failing to meet Australia's obligations as a signatory to the UN Refugee Conventions.

Critics say the three-year visas do not provide for the possibility of permanent protection.

Australia's tough policies aimed at stopping asylum seekers include sending them to camps in impoverished Papua New Guinea and Nauru, where they face long periods of detention while they are processed.

Under the new legislation, refugees may eventually apply for expensive student or skilled migrant visas, although there is no provision for them to ever be reunited with their families.

Subjecting refugees to a visa process that favours those with marketable skills risked creating a backdoor immigration system, said Jane McAdam, director of the Andrew & Renata Kaldor Centre for International Refugee Law at the University of New South Wales.

Several of the provisions could place Australia in violation of international law, she said, and the approach overall showed a worrying disregard for rule of law.

"It's a bit like in Alice in Wonderland where they say 'words can mean anything you want them to mean', because essentially that's now what is happening with the minister's interpretation of international law," she told Reuters.

"You can't just say this complies with international law because we say it does."

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