Speaking to the National Press Club this week, Harding said: “Australia has been one of the most successful countries in attracting international students, but the market is becoming ever more competitive.”

She warned that the country was risking jeopardising its role as an education provider in the Asian century.

“In this environment, Australia cannot afford to have the quality of our education and research brought into question, as it must be when the government reduces public funding per student compared with that previously committed, and reduces funding for research and support of our rising research stars.”

The new measures call for students to pay back “start-up scholarships” saving the government AUS$1.2 billion while a 10% discount on upfront fee payments has been scrapped bringing in an additional AUS$230 million. Scholarships for Australian postgraduate students will also take a trim but not those for international students.

A further 2% “efficiency dividend” will be imposed on university funding starting in January next year, dropping to 1.25% in 2015 but ultimately raising AUS$900 million.

The government says the money gained from cuts to the tertiary sector will go toward primary and secondary school spending, equating to AUS$4,000 more per student.

Harding however says despite being billed as only in effect for two years, “these are cuts that just keep cutting” leading to “our research and innovation efforts going backwards, with all the knock-on effects for our economy, our competitiveness – and our attractiveness as an education destination”.

“Quality is at the core of Australia’s comparative advantage as a provider of higher education”

She also said that the cuts could affect Australia’s reputation in the region. “Quality is at the core of Australia’s comparative advantage as a provider of higher education,” she said. “To compromise quality would be to compromise one of our largest export industries, when we know we must pitch higher education as the centrepiece of Australia cementing its place in the Asian century.”

In turn, the secondary industries propped up by the sector will suffer as well according to Harding. “What about the one hundred and twenty seven thousand jobs – including the 88,000 jobs from outside of higher education – supported by the education sector’s $15 billion of export earnings?”

The announcement came as a particular blow to the peak body that in February announced the “A Smarter Australia” campaign that committed AUS$5 million over the next five years to promoting university development including more than doubling international student numbers to more than 700,000 a year by 2030.

“Cuts do not take us in the right direction. They do not take us towards a smarter Australia,” she warned. “Any diminution of the international flavour of our campuses will be a very sad outcome.”