Christopher Pyne's bid to deregulate tertiary fees has suffered a major setback with the influential Group of Eight universities withdrawing support for any more compromises aimed at securing crossbench support.
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The powerful coalition of Australia's leading universities, which has been a key backer of the government's proposals, said on Tuesday the federal Education Minister's original package to uncap tertiary fees is being watered down to the point where the compromises being made to secure hostile Senate votes is defeating the purpose.
CEO of the Group of Eight Vicki Thomson called for a depoliticised back-to-basics review instead of a third attempt to pass the legislation but the self-declared political "Fixer," Mr Pyne, immediately ruled this out via Twitter.
"The higher education sector has faced 33 reviews since 1950 and another review is not a substitute for action," he said.
"I suspect from his perspective, he is still working on the basis that he'll get his legislation through. We're not quite as confident as he is," Ms Thomson said in Canberra.
"He's always the eternal optimist and usually we are as well but in this case I think we've seen the writing on the wall,
"The crossbenchers are giving us no indication that they want to actually change their position and they're not giving us any indication they want to change their position on a compromise package either," she said.
Indepdendent senator Nick Xenophon, who has led calls for a comprehensive review of university funding, said: "This is a breakthrough moment in the debate.
"The Group of Eight is being sensibible. The government should focus on getting a good practical outcome for students and universities, not an ill-considered ideological fix."
Ms Thomson also called on Labor to announce its plan for the higher education sector and pointed out they had created the unsustainable funding environment in the first place.
"You can't have a system where you deregulate student numbers, you encourage more students to come to our universities but you regulate funding so that we're all funded the same,
"You don't have to be a rocket scientist to work out that equation just doesn't work," she said.
The Group of Eight have been the strongest supporters of fee deregulation, which would allow them to charge significantly more for some courses due to the prestige attached to their degrees.
