Chronically ill foreign workers and their families, including those with HIV-AIDS, will be allowed to settle in Australia for the first time as the Immigration Department loosens its stringent health rules to alleviate the skills shortage. The department is widening a loophole that lets it waive the health requirement for some sick dependants of Australian citizens.

Taxpayers will spend nearly $60 million on healthcare for 288 migrants granted special clearance last financial year to live in Australia, despite failing health exams. These included 59 cases of HIV infection, 10 of cancer and 26 of intellectual impairment. Most of the waivers were granted to the foreign partners of Australian citizens.

Now the federal government wants to widen the health loophole in a bid to lure skilled immigrants who otherwise would be turned away on the grounds of illness, mental health or chronically ill family members.

But NSW — the strongest magnet for new migrants — has so far refused to sign the change, which requires state and territory agreement because of the potential drain on their hospital systems. In a submission to a parliamentary inquiry into Australia’s treatment of disabled migrants, the Immigration Department warns that removing health restrictions could strain health services already in short supply, such as organ transplants or dialysis. “Additional migration, particularly if current health restrictions were to be removed, could lead to increased pressure on healthcare systems,” it says. “Any significant change to the current health requirement would need to be considered in the context of potential impacts on health and welfare expenditure . . . particularly in terms of prejudice to the access of . . . citizens and permanent residents to healthcare and community services.”

Departmental data reveals that 42 health waivers were granted to foreign workers on temporary skilled visas during 2008-09. The department plans to extend the waivers to workers seeking permanent residency, and those who have set up businesses in Australia.

Health bans were lifted last financial year for 138 temporary immigrants seeking to remain in Australia — at a total cost to taxpayers of $19.5m in health and community services. Another 150 immigrants who applied offshore were granted waivers, at an estimated cost of $38.2m. HIV was the most common health condition, involving 59 cases at a cost of $14m, with 26 cases of intellectual impairment at a cost of $1.2m, and 10 cases of cancer, at a cost of $751,500. The department knocked back applications from another 1586 would-be migrants who failed health tests — at an estimated saving to taxpayers of $70m.

Federal parliament’s migration committee began inquiring into Australia’s treatment of disabled migrants after Immigration Minister Chris Evans intervened in 2008 to grant permanent residency to a German doctor whose son had Down syndrome.