Education Minister Dan Tehan met with university vice-chancellors in Wollongong on Wednesday to discuss a report on performance-based funding.

The report was commissioned in the wake of a $2.2 billion funding freeze initiated by the coalition government in 2017 to help balance the federal budget.

Performance-based funding will begin from 2020 and grow in line with population growth of 18 to 64-year-olds, providing an increase of around $80 million next year.

University performance will be determined by such factors as graduate job outcomes, student success, student experience and participation of indigenous, low socioeconomic status, and regional and remote students.

Review panel chair and University of Wollongong vice-chancellor Paul Wellings said linking a small proportion of funding to the performance of universities was a world-first.

"It's a starting point - how do we start to grow the sector again," he told reporters.

"There was a cap put in to try and control the overall spend ... and now we are starting to see a green shoot emerge and a new opportunity for funding."

Mr Tehan hoped to finalise the details of the plan by the end of the month, after a further meeting with university bosses.

Universities were key to improving Australia's productivity and fulfilling the government's promise to create 1.25 million jobs over the next five years, he said.

"We are providing over $17 billion to the sector," he said.

"What the model does is universities give up a tiny bit of autonomy where they are not performing and enables government to work with you to lift that performance."

National Union of Students president Desiree Cai said the promised funding was inadequate in light of chronic underfunding of universities.

"At the very least, Minister Tehan needs to restore funding to what it was before the $2.2 billion funding cut introduced in the funding freeze," she said.

The government also needed to step up support for students, including boosting the Youth Allowance and student income support, and tackling job insecurity and underemployment in the workforce.

National Tertiary Education Union president Dr Alison Barnes said there could be many unintended consequences from the performance-based criteria.

"If the 'job outcome' is not linked to the learning, we may see the perverse outcome of many more lawyers being qualified, but working in fast food outlets," she said.

As well, staff could come under pressure to improve student pass rates in a bid to reduce the number of dropouts.

Australian Associated Press