TAXES should rise to improve university teacher quality, the head of Universities Australia says.

Glyn Davis, who is also vice chancellor of Melbourne University, made the call while launching a $5 million pre-election ad campaign promoting the sector and calling for a multi-billion dollar boost in federal funding.

Professor Davis said Australia spent too little on university teaching by world standards and needed a 2.5 per cent increase - or $1.8 billion over three years.

''I'm not brave enough to say, on behalf of all of the vice chancellors I'm purporting to represent, I'd like to see tax increases,'' he told the National Press Club.

But calling for rational, political debate on tax policy, he said it would be ''hypocritical to stand up and say we shouldn't raise taxes and yet we'd like to see more public spending.''

Professor Davis said it was his ''personal view'' that there was a ''profound case'' for more public investment in areas like the Gonski school reforms and National Disability Insurance Scheme.

''Neither of those are going to pay for themselves,'' he said.

''They do require us to be willing to rethink the tax.''

The comments came ahead of an industry address by Opposition Leader Tony Abbott today, in which he will announce a new working group to look at how online learning can improve teaching and expand markets domestically and into Asia.

Mr Abbott will also promise not to ''micromanage'' universities and cut red tape.

He wants quality research and the academic standing of institutions protected ''so that students can be confident that their degrees are taken seriously''.

Meanwhile, a new report signals international students are falling back in love with Australia after snubbing our shores.

The country will host 520,000 international students by 2020, up from the 402,000 here now, the International Education Advisory Council report said.

About 80 per cent will be from Asia and they will pour $19.1 billion into the economy.

But the 30 per cent increase still won't reach the heady heights of 2009, when 630,700 opened their textbooks across Australia.

Interest in studying here was already up, with higher education visas applicants stronger in the last half of 2012, Tertiary Education Minister Chris Bowen said.

Actual student numbers are predicted to rise next year.

The report foresees a ''new era'' of sustainable growth after the ''unsustainable increases'' in the VET sector between 2006 and 2009.

Those years saw a massive 65 per cent increase in numbers, but were followed by concerns over student safety and the surging Australian dollar.

The report makes 35 recommendations, like addressing affordable student accommodation and more opportunities for work experience and warns of massive worldwide competition for international students.

