The member for Bean said University of Canberra had raised concerns that it would be receiving less funding per student in many of the areas in which students were being encouraged to enrol, including teaching, nursing, science, engineering and maths.

"You would have thought from the rhetoric that they were actually getting greater funding because the actual fees per student are going down for some of these degrees," Mr Smith told The Canberra Times.

"But what the government's actually doing is they're actually reducing funding that they providing to universities for these courses. It's putting a lot of pressure on universities to provide these really important career-oriented degrees."

He said the university would face a cut of about $1 billion to their guaranteed funding, while the average funding per student would drop by 5.8 per cent.

"They've basically found a way to fund the sector less. The sector is under so much pressure they actually need greater support."

Universities will receive less overall yearly funding per student in many disciplines, including:

Mr Smith said the extra domestic places promised - 39,000 in 2023 and 100,000 in 10 years - would not keep up with demand caused by the pandemic and associated recession.

"What universities actually need is for for the government to seriously support more places for domestic students, that's what they need to be focusing on.

"And that will actually provide great great assistance to the university sector as well as building our knowledge capital."

Mr Smith spoke against the bill before it was passed in the House of Representatives on Tuesday night.

His statement came as Universities Australia called for an immediate increase in university research investment to support Australia's COVID-19 recovery and stem the loss of research talent.

"Independent estimates show that $3.3 billion - around 27 per cent - of university research and development budgets are at risk," Universities Australia's Chief Executive Catriona Jackson said.

"Private sector investment is expected to decline sharply, making the role universities have played keeping Australia's R&D effort alive ever more important."

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Education Minister Dan Tehan said the new funding clusters better aligned with the cost of teaching.

"Based on university data provided by the sector to Deloitte, the government has better aligned the cost to students and the taxpayer of teaching a degree with the revenue a university receives to teach that degree."

The new funding rates were derived from Deloitte's Transparency in Higher Education Expenditure study, which 32 universities participated in and involved international enrolments.

Mr Tehan said the government was encouraging students to tailor their studies to learn skills in areas of future jobs growth.

"That means breaking down the traditional degree 'silos' by choosing units of study across disciplines and introducing a price signal to students by making degrees cheaper in areas of expected job growth," he said.

"We will also establish a $900 million National Priorities and Industry Linkage Fund - with a strong focus on investment in STEM industries - to support universities to produce job-ready graduates for their local industries and communities."

Mr Smith said Labor would like to see the bill go before a Senate committee and ultimately be scrapped entirely.