Scott Morrison has flagged the Australian government will respond to public pressure and cut the immigration cap, saying he has heard “loud and clear” the protests of Australians about overcrowding in the biggest cities.

“They are saying: Enough, enough, enough. The roads are clogged, the buses and trains are full. The schools are taking no more enrolments. I hear what you are saying,” Morrison said in a speech in Sydney on Monday night.

“That’s why we need to improve how we manage population growth in this country.”

Morrison said he would “move away from top-down discussions about population to set our migration intake caps.

"I anticipate that this will lead to a reduction in our current migration settings.

"This is to be expected since our current permanent intake is almost 30,000 a year below our current cap [of 190,000]. So we will look to make an adjustment as we go forward in to next year and this should not be surprising.”

When federal treasurer, Morrison was reluctant to yield to the strong pressure from the right in the Liberal party about immigration levels, although the government was actually reducing the intake in practice, while the cap remained unchanged.

But as prime minister he has increasingly been reacting to the mounting community pressure on the issue, while foreshadowing a comprehensive population policy, including the involvement of the states.

In his speech, Morrison argued the economic benefits of immigration – including temporary migrants.

But he said that far too often planners had treated population “as one amorphous blob”.

“That doesn’t work for Australia. We’re too big and diverse. Talking about average population growth is like talking about our average rainfall. It fails to recognise the different experiences and outlooks of different cities or regions.”

Morrison repeated his plan for a discussion with the states and territories about local population growth, although the Commonwealth would always retain responsibility for determining the overall intake.

The conversation should be “grounded in data, economics and community sentiment”, he said.

“A responsible population discussion cannot be arbitrarily about one number, the cap on annual permanent migration. It is certainly relevant, but you have to look at what sits behind those numbers.

"For a start, more than half the people who become permanent migrants are already here on temporary visas.

"To contemplate our permanent visa settings would also require upstream changes to how many people are coming in on temporary visas as well. The implications of this need to be understood, including by state and territory governments.”

Morrison said changes must be done in a way that ensured states wanting more people were not disadvantaged and that there were mechanisms to send new migrants to where there were jobs and services.

“Managing population change is a shared responsibility, involving all levels of government,” he said.

“It is the states who build hospitals, approve housing developments, plan roads and know how many kids will be going into their schools in the future.

"The states and territories know better than any what the population carrying capacity is for their existing and planned infrastructure and services. So I plan to ask them, before we set our annual caps.

"The old model of a single national number determined by Canberra is no longer fit for purpose.

"While the benefits of population growth are widespread – in terms of economic growth and a more skilled and enriched society – the pressure points are inevitably local and varied.

"It’s about getting the balance right and understanding there is variation between our cities and regions. So we need a more targeted and tailored approach to conversations about population.”

Morrison said he was writing to state and territory leaders for their input, and putting the population issue on the Council of Australian Governments meeting agenda. The council meets on December 12.

The states’ population plans would “feed into the setting of our migrations caps and policies for next year, ensuring that migrations is finally tied to infrastructure and services carrying capacity”.