Higher education experts delivered that verdict after a number of unis sunk down the prestigious 2026 QS World University Rankings list.
University of Melbourne retained its position as the top-rated Australian institution but it took a six-place slide against overseas educational facilities, slipping from 13th to 19th in the world.
University of NSW ranked 20th, down from 19th in the 2025 edition, while Sydney University dropped seven spots to 25th.
Australia had been "living off our reputation for years", with facilities in other countries improving while a lack of government funding and international students hurts local progress. RMIT strategic insights director Angel Calderon said.
"But even though rankings are sort of declining in Australia, we have one of the best systems in the world and it's quality education, people need to take rankings with a grain of salt," he told AAP.
"At the end of the day, people should be able to pursue their dreams, regardless of what a ranking is telling you."
Australia's debate surrounding international student levels and universities operating at financial deficits had hurt reputations, Mr Calderon said.
Monash University higher education policy professor Andrew Norton said the fall in rankings were not highly significant but could mean more international students shunned local universities.
"Policy change in Australia and its competitors in the USA, UK and Canada are reducing the supply of international student places … for universities that is a bigger worry than the rankings," he told AAP.
The chief executive of Australia's Group of Eight - the nation's leading universities known for their strong research and high academic standards - said the results remained "impressive".
"This comes against a backdrop of global uncertainty and mixed messaging from our largest research partner, the US, which threatens our very capacity to deliver on our mission of education and research," Vicki Thomson said.
"And yet despite these headwinds, Australia continues to punch above its weight, ranking fifth overall as the best higher education system in the world."
The QS rankings test universities on a string of categories including academic and employer reputation, citations per faculty, their global engagement and sustainability.
Melbourne tops both reputation categories for Australian schools and is the only one inside the top-50 based on reputation with employers.
Opposition senator Jonno Duniam said the results were "sobering" and should prompt a rethink on higher education policy and funding.
"We want education policies that meet the 21st-century skills that our economy demands, not just funding injections from which Australian taxpayers cannot see a reasonable return on their investments - not to mention our university students who deserve better," he said.
Australian National University (ranked 32 in the world), Monash (36) and Queensland (42) are the next highest-rated facilities.
Adelaide University, a merger of two former South Australian universities, made its first appearance on the list at 82.
One of its predecessors, the University of Adelaide, was 82 in 2025.
The University of Sydney, which notched one of the nation's largest drops, pointed to other recent rankings where it topped Australian schools.
"Rankings fluctuate year to year, and this year is no exception, with minor changes across the board in both major rankings," vice-chancellor Mark Scott said.
TOP 10 AUSTRALIAN UNIVERSITIES IN QS WORLD RANKINGS
*University of Melbourne - 19 (previous rank - 13)
*UNSW - 20 (19)
*University of Sydney - 25 (18)
*ANU - 32 (30)
*Monash - 36 (37)
*University of Queensland - 42 (40)
*University of Western Australia - 77 (77)
*Adelaide University- 82 (new entry)
*UTS - 96 (88)
*RMIT - 125 (123)
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