Baby boy Ferouz was born in Brisbane's Mater Hospital last year after his mother, from Myanmar's persecuted Rohingya minority, was transferred to Australia from the Pacific state of Nauru due to concerns about her pregnancy.
Since July 2013 Australia has denied asylum-seekers arriving by boat resettlement in this country, sending them instead to camps in Nauru and Papua New Guinea.
The government considers Ferouz an unlawful maritime arrival like his parents, and has already denied him a protection visa.
"On the applicant's birth he entered Australia and became an 'unlawful non-citizen', given that neither of his parents held a valid visa," he said in his judgment.
"The applicant is therefore, in my view, an 'unauthorised maritime arrival'... And his application for a protection visa was invalid."
Canberra's immigration policy is designed to stop asylum-seekers from using people-smugglers to bring them to Australia by boat, a practice which has resulted in the drowning deaths of hundreds of people over the years.
Prior to the ruling, lawyers had said the fate of about 100 babies born on Australian soil to asylum-seeker parents who arrived via boat rested on the decision.
The challenge to Ferouz was one of two court challenges to Australia's hardline asylum-seeker policy.
Yesterday the High Court in Canberra began hearing a case on the validity of a law used to detain 157 Sri Lankan Tamil asylum-seekers for weeks on the high seas in June, after they sailed from India.
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