Australian universities still face “a nervous couple of months” despite the failure of the government’s package of funding cuts and tuition fee hikes, a sector expert has warned.

The Liberal-led government’s plan to reduce higher education funding by A$2.8 billion (£1.7 billion) and to increase fees by 7.5 per cent was doomed to failure after the Nick Xenophon Team, which has three cross-bench senators, said that it could not support the measures. With Labor and the Greens opposed, the government needed the support of at least 10 of the 12 cross-benchers to pass the bill.

But Simon Birmingham, the education minister, has not ruled out seeking alternative ways of delivering savings that would not require legislation.

“We will consider the options of this decision for higher education policy and, as always, will also ensure any budget implications are addressed,” he said. “With taxpayer funding to universities having grown at essentially twice the rate of the economy since 2009, it’s fair and reasonable to continue to expect a modest contribution to budget repair.”

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Andrew Norton, higher education programme director at the Grattan Institute thinktank and a member of the expert advisory panel convened by the government last year to help develop a future plan for universities, said that this meant that universities “face a nervous couple of months waiting to see what the government will do next”.

“Perhaps the main threat is that they will reduce future higher education spending through the funding agreements they make with each university,” Mr Norton told ̽����Ƶ. “Under existing legislation, the government cannot reduce funding for bachelor’s degree domestic students, but they can freeze it at 2017 levels or increase it by some amount that is lower than would otherwise be paid.”

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These funding agreements have to be renewed by the end of 2017. Alternatively, Mr Norton said, ministers might look to reduce spending on equity or research programmes, which can be done by regulation, but this would be a question of “how much they want to save money versus the policy and political costs involved”.

The government’s higher education bill, which was part of its budget, also included plans to make 7.5 per cent of sector funding allocated on a performance-contingent basis, with universities most likely being judged on the sorts of student outcomes used in the UK’s teaching excellence framework.

Margaret Gardner, vice-chancellor of Monash University and chair of Universities Australia, acknowledged that the sector’s funding battle with the government was “not all over”.

“It’s certainly true that, while this legislation will now not pass, of course the government has other measures open to it,” Professor Gardner told THE. “I hope that the government sees that in general the public is not persuaded that universities should be the major target from which they derive funds back in order to deal with broader budget repair.”

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Professor Gardner said that she supported the Nick Xenophon Team’s call for a review of post-secondary education in Australia, including vocational training.

“We need to look across the whole of post-school education, looking at what should be the shape of tertiary education in Australia for the future,” she said. “That’s what’s vital for Australia’s continued prosperity.

“Dealing with the [higher education] sector separately and making ad hoc changes is not a path to a sustainable future.”

chris.havergal@timeshighereducation.com