"In the interests of our children and our grandchildren, the time has come to bring the school funding wars to an end and to focus with renewed energy on ensuring that all our children have great schools and great teachers so they can realise their full potential."

Senator Birmingham said annual funding would increase from $17.5 billion this year to $22.1 billion by 2021 and $30.6 billion by 2027. The government would legislate the 10-year funding trajectory to ensue certainty. The deal means the budget will have to find another $2.2 billion for schools over the next four years. This will be on top of the extra $1.2 billion promised before the last election. Labor has already promised $3.8 billion extra over the same period and $37 billion extra over the decade.

The cuts to universities announced on Monday will save $2.8 billion over three years.

'Negative growth' for elite schools

The funding model would not discriminate between public, private and Catholic schools and Senator Birmingham said that as a result, 24 of the nation's wealthiest schools, all in the eastern states, would experience "negative growth" in their funding over the decade.

Education Minister Simon Birmingham says the Catholic schools are pushing "falsehoods" about funding. Alex Ellinghausen

About 350 would experience "slower growth" but most schools - more than 9400 - would experience "very significant growth in their funding," he said.

The states would have to maintain their levels of funding as a legislated condition of the new model to stop them using the extra commonwealth money as an excuse to cut their own.


The policy is a backdown by the Coalition which has fought Labor tooth and nail over Gonski since it won office in 2013.

Mr Gonksi said he was "very pleased" the government had accepted the recommendations he made back in 2011 when commissioned by the Labor government.

But Labor leader Bill Shorten sceptical, noting the Commonwealth was still spending $22 billion less than Labor over the decade.

"Australians will never trust the Liberals when it comes to properly funding schools. When they think they can get away with it, they'll cut," he said.

The announcement was unanticipated given the government had postponed until June, a month after the budget, a meeting with the states to thrash out the new funding deal.

Mr Turnbull called the state premiers before the announcement on Tuesday, while Senator Birmingham called the Catholic and independent school sectors. A new deal on implementing the reforms over 10 years will now wait until Mr Gonski's new inquiry reports.

Reverses Abbott's move

When Tony Abbott came to office in 2013, his government scrapped the six-year school funding deal that the Gillard government had signed with the states which ensured increased funding through to the end of 2019. This was based on a needs-based model designed by Mr Gonski.


Instead, the Abbott government resorted to a four-year deal which expires at the end of this calendar year.

Labor promised before the last election to restore the original Gillard deal which would result in the schools receiving a estimated $4.5 billion extra in 2018 and 2019 and a total of $37 billion over the decade ending in 2026.

This $4.5 billion estimate was later amended to $3.8 billion by the Parliamentary Budget Office which costed Labor's policy.

To try and counter this, the government announced an extra $1.2 billion for schools for 2018 and 2019 before the election, meaning Labor was promising a total of $2.6 billion more than the government.