Britain should beware the Australian experience before going down the same road, says Mark Levick. Being in a British university in the 1990s is becoming somewhat similar to my Australian experience of the 1980s. In the 13 years of Labour reforms, Australian universities became case studies in enterprise economics; competitive funding arrangements based on "quality assessment" league tables, performance-based academic contracts and the vigorous development of alternative income sources.

The federal government simultaneously forced an increase in undergraduate places and introduced hefty annual tuition fees for all students. Instead of funding the extra activity from this new income, the government rewarded those institutions that achieved set "efficiency savings" with static recurrent funding. Those that fell short of the mark faced forced cuts in their budgets.

Universities responded by freezing salaries, increasing student numbers in the "cheaper" courses, accepting private foreign students, corporatising staff expertise and developing various fund-raising schemes. Egalitarianism saw the Australian equivalent of polytechnics all become universities but, unfortunately, many of these institutions have remained generalist, relatively underfunded and have poor research profiles.

There has always been intense competition for dwindling research grants, but now there is a new tension; failure to attract research funds has implications for league ranking and hence fiscal support. Consumers have voted with their feet and the government should be pleased as this response is entirely consistent with the principles of a free market. There is fierce competition for entry to the more prestigious established universities which offer more popular professional degrees, remain somewhat better funded, have superior research profiles and are more highly regarded by employers. Official league tables have ensured that an unofficial two-tier system remains.

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The 1990s "education consumers" have pushed up the entry marks for courses in law, finance, media and business management at the expense of the less glittering courses in mathematics, engineering and agriculture. Some departments have opted to tolerate empty places rather than drop the entry marks even lower.

There is a real perception among school-leavers that research science is unsexy, poorly paid and pretty much a dead-end career - not a surprising view given the chronically ill Australian research environment. In the language of the markets, we are facing a future excess demand for technologically clever graduates, but there is no investment in meeting the projected supply requirement.

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British academia is debating some similar reforms and many here are awaiting the vice chancellors' decision later this year on whether to introduce student fees to offset recently announced budget cuts. If the Australian experience is anything to go by, once introduced these fees only move one way - and that is upwards.

The new conservative coalition government this month announced its intention to increase student fees to cover 40 per cent of tuition costs from its previous level of 24 per cent. I just missed out on having to pay fees myself, but my medical training would now cost around Pounds 18,000 to be paid off by a graduate levy through the income tax system. If I had done my PhD in Australia, another Pounds 6,000 would be added to that bill. Long and expensive courses now seem unaffordable to young school-leavers, particularly if the future earnings potential of a chosen career is perceived as low. Students are beginning to make career decisions based on economics rather than on interest or aptitude.

Similarly, potential academic recruits have voted with their feet. Academic salaries have been squeezed so tightly and for so long that recruitment is now a real problem. A young medical specialist with a PhD could expect to earn Pounds 19,000 as a post-doctoral fellow in an Australian university. It would not be so bad if one did not have to give up a salary of Pounds 36,000 as a junior hospital specialist to do it. An eminent foreign consultant that one leading Australian university was attempting to recruit, when told of his proposed salary, initially thought it represented relocation expenses, pension and clinical loading rather than his pay. Academics have had to accept that some of their postgraduate students will start off on higher salaries than a professor earns. This trend partly explains why a government committee has already identified an emerging shortage of suitably trained and experienced researchers and academics in some disciplines.

I have been officially asked by an anxious Australian scientific task force worried about the "brain drain" why I undertake research in Britain. Unfortunately I found that the questionnaire did not seem to ask the right questions. British academics make a distinct and clear contribution to public debate and policy, and so at least appear more valued and relevant. There is a tradition of strong commitment to British research by government agencies and bodies such as the Wellcome Trust that seems to transcend the political hurly-burly. Students here receive assistance to receive training rather than paying the government to provide it.

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The Australian government likes to think of its universities and research institutes as lean and mean organisations that have been honed down and tuned up by exposing them to invigorating competitive reforms. If this is truly the case, why is it that so many of us choose to work for their "competitors" abroad? Probably because they are better. Let us hope the British policy-makers look very closely at the Australian experience first. I do not fancy living in the United States.

Mark Levick is a researcher in the departments of pathology and medicine at the University of Cambridge.