The Morrison government has embarrassingly dumped a $1 billion plan to privatise the processing of immigration visas, using the cover of coronavirus to walk away from a tender that had been shrouded in controversy because of the involvement of one of Prime Minister Scott Morrison's best mates.

Two consortiums have been bidding for the 10-year contract to replace the Home Affairs Department's ageing computer system to process visas and move further away from paper-based applications and manual decisions.