A euphemism to describe both refugees and illegal immigrants. In Australia the phrase helps the government avoid using the term 'refugees' which would generate more public and media sympathy. By lumping people fleeing genuine persecution and war with illegal immigrants it was easier to dehumanize them and thus implement harsher policies to prevent them entering Australia, as happened in the 2001 Tampa Crisis.
The phrase has similar political implications to the United States' use of 'unlawful combatant' in that it introduces a new classification to debate on the issue and thus sidesteps the rules that apply to the old categories.
Ashley Pomeroy tells me that the phrase is also common in the United Kingdom.