Its analysis shows that in 1986, Australia's universities obtained 83 per cent of their incomes from the federal government and 2 per cent from students.

In contrast, the government's share last year had dropped more than half to 41 per cent, whereas income from student course costs and charges had jumped to 38 per cent.

This means students could soon be contributing more than the government, which assumed full responsibility for higher education in 1972.

Higher education is one of the election battle grounds between the government of Prime Minister John Howard and the opposition Labor Party led by Kevin Rudd. Australians go to the polls on November 24 and university lobby groups have been highlighting the parlous state of federal spending on higher education.

Group of Eight chairman Professor Alan Robson said the fall in federal funding was placing intolerable pressure on the quality of the student learning experience, as well as on academics.

'The student-staff ratio has risen from 14.1 to 1 in 1986 to 19.1 to 1 in 2006, well above that of our main international competitors,' Professor Robson said. 'The world's leading universities typically have ratios of less than 10 to 1.'

He said the government's policies failed to help universities respond to changing needs and sustain international competitiveness.

'It is time for major rethinking of higher education policy and financing. If the problems are not tackled urgently, Australia will fall further behind the world's leaders,' he said.

According to the group, the key problems are that government spending on universities is inadequate to sustain an internationally reputable standard and that the existing situation is inequitable.