The Federal Government is making the case for cuts to higher education funding in next week's budget, pointing to a new report that shows university revenues are growing faster than costs.

Key points: Education Minister warns uni funding is "at record levels … but has grown beyond operations costs"

Education Minister warns uni funding is "at record levels … but has grown beyond operations costs" Changes are expected to include student fee increases

Changes are expected to include student fee increases The Government abandoned its policy of full university fee deregulation last year

Changes are expected to include student fee increases and a slash to Commonwealth university funding, which Education Minister Simon Birmingham warns is at "record levels, but it has grown above and beyond the costs of their operations".

Senator Birmingham is expected to detail some of the reforms in a speech to business and university leaders tonight, but said he would not pre-empt the announcement, instead referring to a Deloitte Access Economics analysis.

It shows universities receive adequate revenue through student fees and Government funding to cover the cost of most degrees.

Senator Birmingham said universities needed to account for how they were spending taxpayer money.

"Universities need to invest taxpayer money judiciously and with appropriate public scrutiny and accountability. Ultimately, both governments and universities operate with a social license granted by taxpayers," he said.

"Australian taxpayers gave universities around $16.7 billion in 2016 alone, or around $19,000 per student, which is more than ever before.

"In the context of a tight national budget, the Turnbull Government is focused on getting the best return for every taxpayer dollar invested."

Treasurer Scott Morrison said it was "hard to make the argument that somehow universities are falling behind when it comes to a funding question".

"We've seen an increase in funding for universities, we have seen that the costs of educating people has not risen as fast as that funding," Mr Morrison said.

"That presents some obvious issues there to ensure that the taxpayers interests are best reflected in how we engage with the sector."

Unpaid student debt weighing down balance sheet

The sector has been in limbo since the Government abandoned its policy of full university fee deregulation, but this does not mark a return to a proposal to allow universities to set their own course fees.

The report shows between 2010 and 2015, the average cost of delivering a degree had increased by 9.5 per cent per student, compared to a funding growth of 15 per cent.

The ABC understands the Government will try to justify its cuts by arguing universities have been "pocketing" taxpayer funds beyond the costs of their operations.

"Universities have a vital role to play in Australia but many mums and dads are feeling the pinch of tighter budgets at home and want to know their tax dollars are being used effectively and efficiently," Senator Birmingham said.

Former and current university students still owe the Government about $52 billion in unpaid HECS-HELP debts, which is weighing down the Government's balance sheet.

The Commonwealth expects one quarter of those debts will never be repaid.

The Government will also consider providing more money for dentistry and veterinary science studies, with the Deloitte Access Economics report pointing to underfunding in those areas.