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A welfare group helping to house boat people in the community has warned that stripping them of work rights could lead to the creation of "ghettos" of asylum seekers unable to support themselves.

Australian Homestay Network executive chairman David Bycroft said yesterday that while he could understand the Government was trying to deter boat arrivals, removing work rights would create a new layer of poor people reliant on welfare.

"Honestly, if we put these people out into the community into shared rental accommodation or into any other forms of self-sufficiency, you are going to end up with ghettos of crowded houses like the international student problem and you are going to end up with homeless people," he said.

Although the Red Cross has the major government contract to assist asylum seekers in the community, Mr Bycroft's organisation has found host families for more than 500 boat people since May. He said another 300 could be placed now but doubted community groups could absorb another big release.

Refugee advocates accused the Government of punishing asylum seekers by applying the "no advantage" test to claims processed on the mainland.

"The uncertainty, unfairness and punitive nature of the 'no advantage' test risks exacerbating the fragile mental health of people who have already been brutalised, persecuted and then traumatised as a result of their journey to Australia," Refugee Council chief Paul Power said.

Human Rights Commission president Gillian Triggs said the decision further undermined the human rights of asylum seekers, while Amnesty International predicted it would fail.

ChilOut, which advocates for young people in immigration detention, said the Government had begun the "live export" of children after sending the first families to Manus Island, where they would get a substandard education and risk catching malaria.

"The 'no advantage' test means children and families could conceivably be marooned on these islands for five years or more," spokeswoman Leila Druery said.

Shadow immigration minister Scott Morrison said the plan was an admission by the Government it could not stop the boats. <div class="endnote">

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