How well do I have to speak English?

For some visa types (such as skilled visas, permanent sponsorship of an Australian company or business migration) you must prove your English language ability.
Unless your native language is English, or you have completed qualifications at an institution where all instruction was in English you will need to sit for the International English Language Testing System (IELTS) test of English language ability.

IELTS has four components: speaking, reading, listening, and writing (www.ielts.org ). The requirements for this test are very high and you should be well prepared for this test. The level of English you require is dependent on the visa category you are applying for. Language ability is divided into the following ranges:

Proficient English: score of at least 7 on all four components of the IELTS test

Threshold English: score of at least 6 on all four components of the IELTS test or a score of at least 5 on all four components of the IELTS test for a trade occupation (ASCO Group IV occupation).

Vocational English: score of at least 5 on all four components of the IELTS test.

Functional English: average score of at least 4.5 over the four components of the IELTS test. Alternatively you can pass the Occupational English Test conducted by the National Language and Literacy Institute of Australia.
When you apply for a skilled visa or business migration any secondary applicants aged 18 or over who have less than functional English will need to pay the "English Language Education Charge" to cover English language tuition after their arrival in Australia.