Australia's refugee intake has been quietly cut by 5000 places a year, leaving advocates up in arms.
The annual cap on humanitarian entrants is being slashed from 18,750 places to 13,750 for the next four years.
Almost $1 billion is expected to be saved through the budget measure.
The Morrison government argues reducing the number of refugees into Australia will allow it to concentrate on people who are already in the country seeking protection.
Acting Immigration Minister Alan Tudge said the cut also reflected the global impacts of coronavirus.
"The government will continue to focus on settlement and integration support for humanitarian entrants," he said.
"This will include prioritising supporting people in work and improving English language skills."
Mr Tudge said in absolute numbers, Australia remained the third most generous refugee resettlement country in the world.
But Greens senator Nick McKim said the saving would come at the cost of desperate people trying to rebuild their lives.
"Instead of doing the bare minimum required of us as a global citizen, this government is abandoning refugees."
Refugee groups say increased offshore detention spending will negate any savings made.
Home Affairs spent $961 million on offshore processing last year.
The department has budgeted $1.19 billion for 2020/21, with spending expected to drop to about $300 million within the next few years.
Another $41.4 million will be spent deterring people smugglers in Indonesia.
The government is also spending $55.6 million reopening a detention centre on Christmas Island to accommodate foreign-born criminals who cannot be deported due to coronavirus border closures.
Amnesty International said the government's decision to cut the refugee intake made no sense at a time more people than ever needed help.
"Instead of seeing these people as a financial burden, this government should be welcoming them with open arms," campaigner Shankar Kasynathan said.
"It's the humane thing to do. It's also, economically and for our communities, the most sensible thing to do."
Australia's net overseas migration is set to fall into negative territory for the first time since World War II.
The budget papers predict a loss of 72,000 people for the current financial year.
Net overseas migration will not return to positive levels until 2022/23.
The record drop in population growth will have far-reaching consequences for the economy.
But the government will not increase the migration cap of 160,000 places per year.
Instead, it is focused on attracting skilled migrants, with the budget locking in an extra $30 million to attract talent from overseas.
The prime minister is also looking at ways to draw international students back to Australia once travel restrictions are eased.
"That's the task between now and particularly the beginning of next year's university year," Scott Morrison told Sky News.
Mr Morrison said cranking up international student numbers could help address shortfalls in permanent migration.
"Yeah, we can mitigate it, and that's what we'll be working closely with the states and territories on that."
Australian Associated Press