The main driver of population growth in Sydney and Melbourne was overseas migration, with 87% of skilled migrants to Australia and nearly all refugees gravitating to those cities.
A Shorten government would set up a new independent body, he said, to investigate which industries had true labour shortages.
The Australian government has revealed its plan to divert migrants away from major cities and boost population growth in rural areas.
The new visa condition would apply to about 45 percent of the total migrant intake-notably, migrants not bound to settling in a particular location.
The resulting strain on infrastructure in Australia's eastern cities cost the economy A$15 billion (S$14.7 billion) previous year, with annual forecast losses of A$40 billion by 2030 if left unchecked, Tudge told an audience at the Menzies Research Centre think-tank in Melbourne.
Migrants who were sponsored by employers would be able to work where employers need them, and those on family reunion visas - typically a foreigner marrying an Australian - would also be free to live where they chose. It would class five cities - Darwin, Perth, Hobart, Adelaide and Canberra - as regional centres for migrants to settle in.
Prime Minister Scott Morrison's government is in the early stages of drafting plans to force thousands of migrants to settle outside the nation's two largest cities. "We haven't announced all of the details of exactly how to do that, but it's reasonably straightforward", Mr Tudge said.
It's not clear if the plan would survive a legal challenge.
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"I'm not sure its legally viable", the Telegraph quoted him as saying.
While much of Australia is sparsely populated, Sydney, Melbourne and greater Brisbane are among the fastest-growing urban areas in the world.
"Any policy that spreads migration will resonate".
Australia's population grew by an average of 220,000 every year between 1982 and 2007 but that figure has grown to 375,000 per year since 2007 with the majority coming from net annual migration.
Sydney and its surrounds need to slash immigration by half to counter worsening congestion in Australia's most populous state, politicians said Wednesday.
Congestion and infrastructure strain in these cities cost the Australian economy Aus$15 billion (US$10.6 billion) past year, with annual forecast losses of Aus$40 billion by 2030 if left unchecked, according to government estimates.
"We must ensure there is a thorough understanding of the key factors that drive population growth, before implementing policies that have the capacity to negatively impact jobs growth and the economy", Pearson said.
