In June 1999 the Australian Government signalled, with the publication of a Green Paper, its intention to reform research and the training of research students in universities. After a period of public and institutional comment and debate, the reforms eventuated and the new policies result in performance based funding for research and research training, which is separated from the base of funding of coursework teaching. The new funding mechanisms can shift core government research resources across universities.

Within universities, funding inputs from government need to be directed internally to research-active areas with large numbers of research students and substantial external grants, which contribute most strongly to the performance indicators that bring in the funding. This train of funding from government through to internal resource allocation can be modelled and the results imply potentially permanent changes in the character of universities, by changing the way academic work is funded and accounted for.

Funding models can leave teaching-active sections, if they have few research students and little external grant funding, without the means to support even basic levels of research and scholarship. This threatens the standard and nature of university teaching, which by its nature should take place within a culture of sustained scholarship and creation of new knowledge through research.

The paper discusses these issues, in the context of models for funding of research, and the responses by university managers and grass-roots academics to the challenges of adapting to the new policy and funding framework.