Education Minister Christopher Pyne has given his strongest sign yet the Abbott government will extend taxpayer funds to for-profit universities in a bid to cultivate a US-style college system in Australia.

In a speech to a London think tank on Monday night, Mr Pyne said a new wave of deregulation was needed to stop Australia's universities falling behind the rest of the world.

Education Minister Christopher Pyne. Credit:Andrew Meares

The speech follows the release two weeks ago of the Kemp-Norton review, which recommended federal funding for private universities, TAFEs and other non-university higher education providers.

Although Universities Australia initially warned the idea represents a "huge gamble" with potentially "devastating consequences", some of Australia's most influential vice-chancellors support the proposal. They include the University of Melbourne's Glyn Davis, the University of NSW's Fred Hilmer and La Trobe University's John Dewar.