University of Melbourne Vice-Chancellor Professor Glyn Davis’s comments in The Saturday Age provide a disturbing insight into the future direction and magnitude of fee changes across this country’s leading higher education institutions.

Course fees at the University of Melbourne are predicted to increase from anywhere between 45 and 60 per cent in the immediate future. Future annual increases above the inflation rate are also likely in order to compensate for the reduction in the indexation rate of future funding.

This from an institution where a law degree is already priced at $114,816 for full-fee students beginning next year.

You can be sure vice-chancellors from the University of Sydney, Australian National University, the University of Queensland and co were relieved Professor Davis broke the silence. They will all be thinking of implementing similar increases.

We’re told that the beneficial effects of deregulation of tertiary fees are increased competition and improved capacity for leading institutions to compete on a global scale.

Treasurer Joe Hockey has noted that “Australian universities will be able to compete with the best in the world by giving them the freedom to innovate and the capacity to respond to the needs of students.”

There are a few fundamental flaws in the Abbott/Hockey/Pyne approach.

Firstly, Australian universities are already batting well above average. According to the UK-based Times Higher Education rankings, we have five universities in the top 100 in the world.

The Shanghai-based QS World University Rankings paint an even brighter picture, with seven Australian institutions listed in the top 100 (and the University of Adelaide sitting just outside at 104).

The Shanghai rankings also place several Australian universities inside the top 20 for particular subjects, including five for law, two for medicine and two for civil engineering.

We also have four inside the top 10 for education.

For a country with only 23 million people, we are clearly not ‘struggling to compete’.

Secondly, deregulation only works in situations where competition is real and the ‘costs’ for students to switch to alternative providers is negligible.

This is not the case for higher education.

Unlike in the US, the Australian sector is stratified (on reputation at least) into a ‘high-other’ dichotomy, with the ‘Group of 8’ universities operating as an effective high-end trading block.

It is highly likely these institutions will all increase fees at similar rates and will be able to trade on their reputations to avoid a student exodus to lower tiers.

Meanwhile, universities outside the Group of 8, including Macquarie University, La Trobe, Griffith, UTS and Murdoch, in order to remain competitive and continue to attract students, will have to keep fee increases to a relatively modest amount, and as a result, will be unable to reap the benefits this policy purports to create.

In short, the top end will remain where they are now, albeit with students bearing the brunt of the fee increases, while the middle and the affordable end of town will suffer.

Despite these likely consequences, it cannot be said that deregulation in and of itself is the root of the evil, as has been portrayed by Labor.

Uncapping fees, whilst maintaining government contributions to the sector, would give each university the opportunity to set its own agenda without being hamstrung by losses in revenue.

Although Group of 8 universities would likely still increase their fees (but by a lower amount), the benefits would be most greatly felt by the non-Group of 8 institutions, who would now be able to provide access to quality education at an affordable rate.

Students would benefit too by now having a real choice in terms price and reputation without a stark differential in quality.

To diffuse some of the heat coming their way, Abbott, Hockey and Pyne have focused on the proposition that “no student will have to pay one cent up front”, as if this answers all questions about whether higher fees provide a disincentive to study.

It is absurd to think that students will not be deterred by the prospect of a 60 per cent higher principal on their loan, particularly when those loans will now increase at a higher rate of interest, ensuring that those who undertake study have a higher effective tax rate of anywhere between two and eight per cent for the next 15, 20, or 25 years of their adult lives.

Are students expected to ignore those implications, because no money is required immediately? It is highly unlikely they will.

For a country looking to be have a smart population and a knowledge-based economy, this could hardly be considered intelligent policy.