The 2026 higher education funding agreements, the legal basis of Commonwealth Grant Scheme funding, were published recently. This post examines public university funding for ‘higher education courses’.

‘Higher education courses’ has a specific legal meaning. It includes FEE-FREE Uni Ready (enabling) courses and coursework programs other than medicine, except for Indigenous students in bachelor degree courses, who are funded separately. Each public university receives a maximum basic grant amount (MBGA) for higher education courses. This funding is intended to be a flexible block grant. Universities can move money between qualification levels and disciplines, except for medicine.

Policy change

For 2026 the government has changed its policy on setting university MBGAs, as part of a transition to a new funding system under the proposed Australian Tertiary Education Commission. For 2023-2025 Labor retained the Coalition policy of indexing MBGAs to inflation and adding regional-campus-biased increments for population change. This policy led to many universities not using all their MBGA, known as ‘under-enrolment’. Coalition policies to compensate higher education providers for under-enrolment cost taxpayers $844 million between 2020 and 2023.

The government has, sensibly enough, decided not to keep increasing MBGAs for universities that cannot utilise the funds. The new policy, as summarised in the funding agreements, is:

• For universities that significantly under-enrolled in 2024, the last year with ‘verified’ data, the provider will receive no increase in higher education courses MBGA between 2025 and 2026. Section 30-27(3) of the Higher Education Support Act 2003 prevents the government from lowering a MBGA between years.
• Universities with enrolments valued at or near their MBGA will receive inflation indexation.
• Universities with significant over-enrolment ‘may’ also receive a share of an over-enrolment fund.

In a document distributed to universities in 2025, significant over-enrolment was defined as delivering places valued at 5% or more above their MBGA.

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