Ten thousand students will miss out on government funding for university this year, peak body Universities Australia says, as the sector looks to accommodate $2.2 billion in funding cuts by the Turnbull government.
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More than 190,000 students are expected to commence university from March, after a similar number graduated last year, but the government has frozen public funding at 2017 levels.
The freeze is not indexed, which means after inflation of at least 1.5 per cent most universities will face a choice between cutting student places, research, facilities or back office costs.
"The impact will vary from university to university," said Universities Australia Chief Executive Belinda Robinson.
"Some will be forced to offer fewer places in some courses to avoid a budget black hole. Others will have to dig into critical maintenance funds or will lose the funding they need to run outreach into regional and remote Australia."
If universities opt to save on student places all of them will have to come from first year students, as universities have already committed to funding those who have commenced their study.
According to body representing universities, the 1.5 per cent figure would therefore be tripled to 4.3 per cent of all new students, resulting in the funding gap of up to 10,000 student places.
Federal Education Minister Simon Birmingham has criticised the sector for not finding enough savings outside of places for students.
The University of Melbourne recently announced a new $1 billion engineering school, while the University of Sydney will spend tens of millions of dollars building a second campus at Westmead.
A 2017 Deloitte analysis found universities were diverting 15 per cent of funding to administration and marketing, doubling from 6 per cent in 2010.
"Are universities really saying that they can't find a meagre 1.5 per cent of efficiencies across their $17 billion budgets?," Senator Birmingham said.
"If so, then they should be embarrassed for putting administrative and marketing budgets before their students."
The remarks, which will kick start another year of tension between the sector and its minister, come as university administrators become increasingly frustrated by the government's push to tighten the sector's belt so that the government has room to move on corporate and personal income tax cuts.
Global ratings agency Moody's warned on Friday that Australian universities would have to increasingly rely on international students for funding, resulting in greater volatility in the market and putting smaller institutions at greatest financial risk.
Ms Robinson said universities had budgets set in place when the government suddenly announced the $2 billion cut at the mid year economic update on December 18.
The move, which did not require legislation, came after the government's reforms were killed off in the Senate, with the Nick Xenophon Team rejecting key elements of the $2.8 billion package and calling for a "Gonski style" review of the sector.
Ms Robinson said as government funding recedes, universities will be under pressure to enrol fewer students in expensive but crucial courses such as nursing, IT, science and engineering.
"These are areas where there are already skills shortages in the economy, a situation that will only get worse as the university cuts begin to bite," she said.
