By Renju Jose and Lewis Jackson

SYDNEY (Reuters) -Australia on Friday increased its intake of permanent migrants to 195,000 this financial year, up by 35,000, in a bid to help businesses and industries battling widespread staff shortages and reduce reliance on short-term workers.

The COVID-19 pandemic closed the country's borders for nearly two years and along with an exodus of holiday workers and foreign students left businesses struggling to find staff to keep afloat.

"It makes no sense to bring people in, have them for a few years, then get a new cohort in to adapt to the Australian work environment," Prime Minister Anthony Albanese told reporters on the sidelines of a government jobs summit in Canberra.

"We want people ... to have a mortgage, to raise a family, to join the Australian family. Migration is part of our story."

The increase will take effect for the current financial year ending June 2023 and will bring Australia's immigration target largely in line with the annual cap of 190,000 that was in place between 2013 and 2019.

That level was cut by 15% to 160,000 just months before the emergence of COVID-19 in a bid to ease urban congestion. The government gave no details on numbers going forward.

The recently elected centre-left Labor government convened the two-day summit, inviting business groups and unions to help find solutions to key economic challenges.

Australia's unemployment rate is now at a near 50-year-low of 3.4% but labour shortages have contributed to soaring inflation that has reduced real wages.

"COVID is presenting us, on a platter, with a chance to reform our immigration system that we will never get back again. I want us to take that chance," Home Affairs Minister Clare O'Neil told the summit.

SKILLED LABOUR RACE

Australia has been competing with other developed economies, like Canada and Germany, to lure more high-skilled immigrants, with the surge in demand exacerbated by an ageing population.

Canada, last month, said it was on track to exceed its goal of granting permanent residency to more than 430,000 people this year, more than double Australia's target, while Germany plans reforms to make itself more attractive to skilled workers.

But a blowout in visa processing times in Australia has left about a million prospective workers stuck in limbo, worsening the staff shortage crisis.

"We understand that when people wait and wait, the uncertainty can become unmanageable," Immigration Minister Andrew Giles told the summit. "This is not good enough, and reflects a visa system that has been in crisis."