Federal Education Minister Christopher Pyne has come out strongly in support of allowing Australia's universities and colleges to compete on price by deregulating what fees they can charge students.

In a speech on Thursday that sets the scene for the biggest reforms to higher education in a generation to be announced in the budget, Mr Pyne will say that price competition, freedom from red tape, and giving transparent information to students about study options are critical to improving Australia's higher education system.

Christopher Pyne has endorsed the idea of allowing universities to compete on price. Credit:Andrew Meares

He will say if Australia is to achieve world class status it will "require government to change the way it treats universities and colleges, and to give them more freedom to do what they do best".

"If universities and colleges were able to compete on price, it would mean they must have a greater focus on meeting the needs of students.