The $15.5 billion international education industry is likely to shrink as shonky operators face their ''day of reckoning'', says the head of a Federal Government review into its future.

Former Liberal MP Bruce Baird, who has been charged with overhauling an industry beset by months of turmoil with violent attacks against students and allegations of corruption, said a contraction was possible over the short term, although he declined to speculate on the size.

Mr Baird said some educational institutions had been set up for the sole purpose of getting students permanent residency visas. He said Immigration Minister Chris Evans and his review into the law and regulations governing the international education industry, would examine ''decoupling'' the link between education and immigration. The review needed to address a ''market failure'', which had been covered extensively in the media.

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