Universities Australia David Lloyd said new modelling has shown a cost to the economy of $7 billion by 2026 if university attainment levels don't rise.
In a speech to the National Press Club on Wednesday, Prof Lloyd said more university degrees were essential in order to address skills shortages.
"The National Skills Commission's employment projections show that in the next few years, more than half of all new jobs will be highly skilled – meaning they will require a university qualification," he will say in the speech.
"The looming iceberg of skills shortage requires a much shorter turning circle than the provision of traditional three-year degree programs if it is to be avoided."
The calls to boost university investment come as the first round of reforms were introduced to parliament following the Universities Accord interim report.
The final report, due to be handed down by the end of the year, will look to overhaul the university sector in a bid to help more students to graduate.
The first reforms include abolishing the 50 per cent pass rule, which was previously introduced as part of the Job-Ready Graduate scheme, being abolished.
Under the rule, students who failed more than half of their subjects would no longer be eligible for Commonwealth funding.
Prof Lloyd said the scheme was hurting students.
"Universities cannot continue to do more and more for the nation with less and less," he will say.
"But that's exactly what we were compelled to do under the Job-ready Graduates package – itself positioned as 'a reform'.
The Universities Australia chair said the accords had the potential to shape the future of higher education.
"We owe it to ourselves, and the nation, to interrogate all the areas in focus appropriately and deeply so that the outcomes drive our universities and underpin their success," he will say.
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