Professor Wellings said such an increase would form "the starting point" for fee hikes, as anything less would leave universities worse off than under existing funding arrangements.

Under changes announced in Tuesday's budget, Australian universities will be free to set their own fees from 2016.

Then, said Prof Wellings, the Australian government's contribution would shrink by an estimated 11¢ - to about 41¢ - for every subsidised tuition dollar.

Students will also have to pay back their debts earlier - from when they start earning $50,638 (down from $53,345) - at a higher rate of interest.

Despite the anticipated pain to students, Prof Wellings said an uncapped fee system would bring UOW "slightly closer" to his stated goal of breaking into the world's top 1 per cent of universities.

"The [amount] of resources that will be available could go up, and ... it would cause us to refresh our focus on the nature of the student experience here on campus."

UOW bosses were expecting a 12-month consultation period to precede any decision to uncap fees, as recommended by the Australian Productivity Commission.

Surprised the government announced the lifting of caps in a "single step", Prof Wellings said it was too early to predict what courses at UOW would be affected.

He said universities that had increased fees overseas had recorded a "short-term blip" in enrolments, but recovered within a year or two.