Christopher Pyne

Education Minister Christopher Pyne. Photo: Andrew Meares

Education Minister Christopher Pyne has given his strongest sign yet the Abbott government will extend taxpayer funds to for-profit universities in a bid to cultivate a US-style college system in Australia.

In a speech to a London think tank on Monday night, Mr Pyne said a new wave of deregulation was needed to stop Australia's universities falling behind the rest of the world.

The speech follows the release two weeks ago of the Kemp-Norton review, which recommended federal funding for private universities, TAFEs and other non-university higher education providers.

Although Universities Australia initially warned the idea represents a "huge gamble" with potentially "devastating consequences", some of Australia's most influential vice-chancellors support the proposal. They include the University of Melbourne's Glyn Davis, the University of NSW's Fred Hilmer and La Trobe University's John Dewar.

TAFEs and the private education sector have also welcomed the review.

While not announcing the government's official response to the review, Mr Pyne strongly hinted the government would adopt the recommendation in the May budget.

"I can assure you unreservedly that the Coalition government will continue to take steps to set higher education providers free, provide them with more autonomy and challenge them to map out their futures according to their strengths," he said.

"We are at risk of being left behind. We need a renewed ambition and it must be bold … Our answer will be, above all, to set our universities free."

Regulation by the Tertiary Education Quality and Standards Agency would ensure that quality is maintained, he said.

Mr Pyne said he was alarmed only one Australian university, the University of Melbourne, is in the top 50 in the world, according to the latest Times Higher Education World Reputation Rankings. While seven Australian universities went backwards in the rankings last year, Asian universities are storming up the leader board. Eight of the top 10 were US universities. 

"We have much to learn about universities competing for students and focusing on our students," he said. "Not least, we have much to learn about this from our friends in the United States."

Mr Pyne said the US college system offers students more choice, encourages competition and foments a culture of philanthropy.

Mr Pyne did not outline how the government would fund the expansion of Commonwealth-supported places to the private sector. One option would be backing the elite universities' call for a deregulation of university fees so students in high-quality, high-income degrees pay more for their education. Another would be reforming the student loans scheme to recover outstanding debts from students who move overseas or who die, as recommended by the Grattan Institute.

Professor Dewar said: "I don’t think the sector has anything to fear from more competition in the market."

But he said universities – which conduct research as well as teach – should receive more government funding than teaching-only colleges.

"There should be a recognition that universities have costs above and beyond our counterparts in the private sector," he said.