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An Australian government report has set off a war of words over the prospect of federal support of for-profit higher education providers.

A report last week by the country's Labor government reviewing the demand-driven system that allocates university places said that the sector should be thrown open to the free market, allowing private, for-profit colleges to access government funding for undergraduate students.

The report also asserted that the government should also fund thousands of sub-bachelor's degree programs to keep poorly prepared students out of university courses until they have the ­academic skills to keep up. Non-university providers are more expert and successful than government-funded universities are at delivering sub-bachelor programs such as diplomas.

The proposal received significant pushback from Universities Australia, which represents the country's mainstream universities.

“The inclusion of these non-university providers in the system isn’t really a recommendation that we think can be cherry-picked. It is these institutions that are currently dominating the diploma market,” he said. “They have 20 years of experience in this, and I don’t think many universities either want to, or can, replicate this anytime soon,” Norton said.

Extending federal funding to for-profit non-university higher education providers is a policy "high wire act" that, if not properly controlled, could endanger the hard-won reputation of the Australian higher education sector, Universities Australia’s chief executive, Belinda Robinson, said.

“Without appropriate controls, expanding the demand-driven system to profit-motivated higher education providers could pose a substantial risk to the reputation of the entire sector, with devastating consequences,” said Robinson.

Universities Australia said it strongly supports the central thrust of the Review of the Demand Driven Funding System to retain the uncapped university system. But Robinson called for a cautious approach

“Although universities are not opposed to even more competition, this represents a radical change to the ecology of Australian higher education and warrants further, deep and comprehensive analysis, including of any unintended or undesirable consequences," Robinson said.

“Before committing to such a huge gamble with what has been a highly successful and internationally regarded system, we would want to ensure that the odds of success were as short as possible.”

The response of the universities' interest group drew a sharp reaction from Andrew Norton, an economist and co-author, with the former Liberal education minister David Kemp, of the government report.

“The reaction particularly of Universities Australia has been quite disappointing,” Norton said at a meeting at Melbourne University last week.

Earlier Universities Australia chief executive Belinda Robinson slammed the proposal to extend subsidies to for-profit providers as a “huge gamble” that could undermine the sector’s international reputation and international student markets.

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