The Australian government has been forced to shelve plans to cut university funding by A$2.8 billion (£1.7 billion) and to increase tuition fees by 7.5 per cent after its higher education bill failed to win support in the Senate.

The legislation was doomed to failure after the Nick Xenophon Team, which has three cross-bench senators, said that it could not support the funding cut or the fee increases. With Labor and the Greens opposed, the government needed the support of at least 10 of the 12 cross-benchers to pass the bill.

However, Simon Birmingham, the education minister, has not ruled out looking at other ways of delivering savings.

The government’s plans would also have seen 7.5 per cent of sector funding allocated on a performance-contingent basis, most likely judged on the sorts of student outcomes used in the UK’s teaching excellence framework.

The developments come as neighbouring New Zealand looked poised to abolish tuition fees, after Labour’s Jacinda Ardern was confirmed as the country’s next prime minister with the support of the New Zealand First party.

One of her key policies was to abolish fees and to increase living cost support for students.

In Australia, Belinda Robinson, chief executive of Universities Australia, described the government’s defeat as “a victory for common sense and Australia’s best interests”.

“The clear message to all decision-makers should be that inflicting major cuts on Australia’s higher education system is the wrong call,” she said. “This is an opportunity for government to hit the reset button and stop, once and for all, treating our university sector as a target for budget savings – when in fact it is an investment in Australia’s future.”

Mr Birmingham said that he was “appalled” by the Nick Xenophon Team’s position.

“Xenophon’s unacceptable approach would further grow the taxpayer-funded student debt burden and deliver even faster revenue increases for universities,” he said. “We are appalled that the troika of Labor, Greens and Xenophon parties are unwilling to make even modest reductions in the rate of spending growth, which under our reforms would still have increased university funding by 23 per cent over the next four years.”

Mr Birmingham added that he would “consider the options of this decision for higher education policy and, as always, will also ensure any budget implications are addressed”.

It is the second time in three years that the Australian government has been forced to scrap major higher education funding reforms. In 2015, Mr Birmingham shelved plans to remove caps on tuition fees and to reduce direct public funding by 20 per cent.

chris.havergal@timeshighereducation.com