A study by consultants EY says university degrees need a major overhaul to keep pace with demands of employers.
Australian universities are "monoliths" in which two out of five degrees will soon become redundant, a new study says.
The University of the Future report by EY (formerly Ernst & Young) says that while Australian universities are a global success story, in terms of the $26 billion a year in export dollars they earn, they face pressure to remain internationally competitive.
EY found in interviews with university leaders that about 40 per cent of university degrees would soon be obsolete and a growing number of students were leaving with heavy debts and few job prospects.
"Australia's universities are monolithic institutions that control all aspects of their teaching and research activities, anchored by physical spaces and time-bound schedules," the report said.
The report said the future of universities would be shaped by two factors - whether government took a hands-on or hands-off approach and demand from learners and employers.
The likely result of this would be the rise of the "commercial university", where the government takes a hands-off approach, prices are uncapped and funding from industry exceeds that from government.
Most of the learners would be 18-25 year olds pursuing undergraduate degrees which are integrated into work, with industry closely involved in teaching and research.
But there could also be "disruptor universities", where most students are continuous learners pursuing "micro-certifications" and using digital technology, but they specialise in either research or learning.
Catherine Friday from EY said for the first time in a long time the firm was recruiting people straight out of TAFE because universities weren't giving graduates the skills they need.
She said increasingly students are paying for degrees that they are unable to use and there is a disconnect between what employers need and what qualifications students are leaving universities with.
"Those institutions that can crack the new, flexible teaching learning models required will reap the benefits, as they outpace competitors that persist in delivering three to four-year degree programs that employers simply do not value," she said.