This is absolutely not a solution in search of a problem...because a better trained, more culturally sensitive and more alert police force and a serious attempt to shut down training and education visa abuse by mid-sized and small-sized firms cannot stop infrequent but highly publicized incidents of homicide, prostitution, drug dealing and burglary nearly as well as a broad application of language skills testing.
Later - A Bloomberg report has a put a positive spin on the story. However, as I discuss with the very honorable Janne Morén in Comments, the government is putting the cart before the horse, bringing up a language requirement before discussing any liberalization of residence.
White-papering Australian foreign policy
7 hours ago