Canberra on Thursday unveiled plans to put "Australian values" at the heart of tougher requirements to gain citizenship, including competent English, belief in gender equality and a four-year qualification period.
He said the government would work with companies to ensure they met labour market testing requirements, and warned "there will be a particular focus on companies that have an unnecessarily high proportion of 457 or foreign workers in jobs as well".
If an applicant fails three times, he will need to wait two years before he can take the test again.
The Australian Government recently announced that it would abolish the 457 visa and replace it with two new visas to protect the interests of native workers.
He said citizenship would only be granted to those who supported Australian values, respected the country's laws and "want to work hard by integrating and contributing to an even better Australia".
Some 114,109 people sat the Australian citizenship test in 2014-15, with 112,474 passing it, according to the latest immigration figures.
Any conduct inconsistent with Australian values will be considered as part of the citizenship process.
The prime minister couldn't say how many more jobs would be available to Australians when the new scheme starts.
A more stringent English language test will also be introduced, which will include "reading, writing and listening" components.
"We are putting jobs first, we are putting Australians first", said Prime Minister Malcolm Turnbull.
Immigration Minister Peter Dutton said there will be greater police checks on citizenship applicants. "This is about allegiance and commitment to Australian values", he added.
"There is no more important title in our democracy than Australian citizen", he said.
"We are an immigration nation", Turnbull said.
In a statement, the Nasscom said that the "457 visa category" covered a lot of fields and should not affect Indian IT workers.
The move comes two days after the government unveiled stricter visa requirements for skilled workers from overseas, amid claims employers were abusing a programme now used by nearly 100,000 foreign workers.
Applicants will be asked to demonstrate that they have integrated into Australian society, for example by joining clubs or by providing evidence that they are employed and their children are in school.
"They're pointed at people who might think that domestic violence is okay".
His plans are expected to be passed by parliament with the backing of right-wing lawmakers.