Universities in Australia will be forced to recruit thousands of fee-paying students at home and overseas over the next three years to make up for funding cuts.
An education department report for the 1998-2000 triennium says federal expenditure on universities will fall by Aus$200 million (Pounds 80 million), while the number of government funded student places will drop by 1,700.
Almost 5,000 funded places have already been lost over the past 18 months because of the government's decision to cut spending.
The report says enrolments will rise by almost 6 per cent in the next three years which will come from students prepared to pay full fees.
Universities are expected to recruit an additional 30,000 foreign students plus 14,500 Australians - all paying full fees.
The growth in the export education market has been astonishing - last year 550,000 foreign students were enrolled in universities and the report projects a rise to 80,000 in three years.
But no one knows whether Australians will be prepared to pay large sums for a degree. Likewise, the extent to which Asian students will continue to flood into the country is equally uncertain, given the financial turmoil gripping most Asian economies.
According to the report, federal funding as a proportion of university income will fall further than it has in the first 18 months of the government's term of office.
By the end of the century federal grants will make up less than half of all institutional revenue - down from 70 per cent in 1990.
Academics and vice-chancellors condemned the government for forcing universities to rely on fee-paying students to provide growth in the higher education system.
Carolyn Allport, president of the National Tertiary Education Union said: "The government will reduce student places funded through the Higher Education Contribution Scheme, where the cost of education is substantially subsidised by the government.
"The government is forecasting rapid expansion of fee-paying programs where students have to meet the full cost of their study and more. Some of these fees go as high as Aus$40,000 a year at postgraduate level and universities are planning to charge undergraduates Aus$20,000 for some courses."
Dr Allport said this represented a major shift by the government away from public responsibility to provide higher education opportunities.
She said that in a "completely blatant way", the conservative government was pre-empting the outcome of its independent inquiry into the future of higher education.
The committee of inquiry is due to report in March. It is expected to make recommendations on funding arrangements, including the appropriate balance between public and private sources of income.
Australian students already paid a much higher proportion of the cost of their higher education than those elsewhere in the world, Dr Allport said.
It was generally considered reasonable to charge students up to 30 per cent of the cost of their study in a public university system yet Australia wanted to lead the way "in slugging students for an unfair and unrealistic share of the burden".
Geoff Wilson, former deputy president of the Australian Vice-Chancellors' Committee and vice-chancellor of Deakin University in Victoria, called on the government to reassess the projected cuts in publicly-funded student places.
He said the cuts would lead to higher unemployment because most students could not afford full fees and would have to go on the dole. Similarly, the crisis in the Asian economies meant overseas students might not be able to pay for an overseas education. "We won't know the full effect of the financial crisis on this year's enrolments for a few more weeks," he said, pointing out that universities had supplied the government with their projections for overseas full-fee paying enrolments mid-way through 1997 - before the collapse of Asian currencies.
"The unemployment rate of university graduates in Australia is less than half that of non-graduates. Cutting back on student numbers does not make sense,"he said.
The report, however, argues that by 2000 the proportion of government versus private revenue in university budgets will more accurately reflect the actual public and private benefits Australians enjoy from earning a degree.