The Gillard government will increase Australia's humanitarian intake to 20,000 - a key recommendation of the Houston report on asylum seekers.
The announcement, made today by Prime Minister Julia Gillard and Immigration Minister Chris Bowen, comes as two boats carrying 107 suspected asylum seekers were picked up in Australian waters and transferred to Christmas Island overnight.
The move means Australia will increase the nation's annual refugee intake from 13,750 to 20,000 places in this financial year - a 40 per cent rise and the biggest boost to the intake in 30 years.
Ms Gillard said the government would immediately resettle an additional 400 refugees from Indonesia to underscore Australia's commitment to offering safe alternatives to dangerous boat journeys.
''This increase is targeted to those in most need: those vulnerable people offshore, not those getting on boats,'' she said.
''People who arrive by boat will get no advantage. It's not worth the risk to life and it's not worth the money, because there is absolutely no benefit to getting on that people smuggler's boat.''
The government has allocated $10 million immediately for rebuilding the asylum seeker processing centres on Nauru and Manus Island. The centres have fallen into disrepair since Labor unpicked the Pacific Solution in 2008.
Mr Bowen said he had spoken to Nauru's Foreign Minister and reported that the island nation would be capable of housing 500 asylum seekers by the end of next month.
Thirty defence personnel would be sent to Nauru to start setting up temporary accommodation once the government formally approved Nauru as an offshore processing destination, he said. It is expected the team will leave within 24 hours.
Meanwhile, the opposition has today tried to force the government to officially designate Nauru and Papua New Guinea as regional processing countries for asylum seekers.
Opposition immigration spokesman Scott Morrison wrote yesterday to Mr Bowen asking him to table the legislative instruments needed to reopen the centres.
''I note your earlier comments to me that you prefer to finalise an agreement with Nauru and Papua New Guinea before introducing the legislative instrument,'' he wrote. ''However, you would also be aware that this is not a mandatory requirement of the legislation to enable such countries to be designated.''
Mr Morrison said this morning Mr Bowen ''has until 4.30pm today to make Nauru and Manus Island legal'', adding: ''There are no excuses for this not to happen.''
If it didn't happen it showed the government ''was dragged kicking and screaming to announce they were going to reopen Nauru'' and was still dragging its feet, he said.
Mr Bowen said his opposite number's machinations were ''nothing but a little stunt''.
Last week Parliament passed legislation that would let the government of the day designate countries to be used for processing asylum seekers who arrive in Australian waters by boat.
It implemented part of the recommendations from a panel led by former Defence Force chief Angus Houston.
Since then, the government has sent Defence and departmental teams to Nauru and Manus Island in Papua New Guinea to look at what work is needed to re-establish processing centres.
- with aap