Fund manager John Abernethy says Joe Hockey should be working to grow the economy and lift tax receipts rather than scaring consumers back into immobility.

ALMOST $6 billion in annual taxpayer funded grants to public universities are likely to be opened to private sector competition under the most radical reforms to higher education in decades.

And a further $250 million in new funding would be extended to uncap the number of students enrolling in diplomas, advanced diplomas and associate degrees, with the Government warning that Australia was falling behind the universities of Asia.

Education Minister Chris Pyne will on Monday give his strongest hint yet that the government will adopt key recommendations from the Kemp-Norton review of higher education and include funding for the expansion of the demand driven system in the budget.

Sections of a speech Mr Pyne is due to give in London, obtained by The Advertiser, reveal that the Government is likely to open the Commonwealth Grants Scheme for the first time to include private universities and non-university institutions such as TAFE.

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This will allow the private universities, higher education providers and non-universities to gain access to the estimated $6 billion in annual grants that have until now been only available to publicly funded universities.

It is seen as the first step in a potential US College style system of tertiary education in Australia, which Mr Pyne will say he supports, and would for the first time open universities to competition.

But Mr Pyne has also hinted that the government will also extend the demand driven system for bachelor degrees — a reform brought in by the former Labor Government to allow universities to set the number of places they offered in each course — to other non-bachelor degrees and tertiary courses.

The deregulation drive, which would involve a $250 million hit to the budget, would also see universities given autonomy to set their own course fees.

“I will not pre-empt the budget today, otherwise the Treasurer may have something to say,” Mr Pyne will say in his speech.

“But I repeat what I have said before: ours is a deregulatory government.

“I can assure you unreservedly that the Coalition government will continue to take steps to set higher education providers free, provide them with more autonomy, and challenge them to map out their futures according to their strengths.”

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“We are at risk of being left behind,” Mr Pyne will say.

“We need a renewed ambition. And it must be bold.

“Kemp and Norton concluded that making changes to the demand driven system will expand opportunities for students, lead to further innovation in courses and modes of delivery, and boost the quality of teaching and graduates. We need all of that.”

Mr Pyne will stress the urgency for reform to Australia’s universities and higher education sector with evidence that Australia was now slipping behind Asian countries in the quality of education.

In a 2013 ranking of universities worldwide, Australia lost ground to universities in China which now has five institutions in the top 200, whereas five years ago it had none.

Seven of the Australian universities in the top 300 all fell in ranking.

He says that the “knowledge superpowers” of Asia such as Japan, China and increasingly Korea now posed a competitive risk to Australia’s $14 billion higher education sector and would soon leave Australia in their wake.

The Opposition has cautioned that any reforms should not raise the cost of a university education for students and said that equity in education must be maintained.