Opposition education spokeswoman Sarah Henderson said the pay rates of some of Australian vice-chancellors should not be set by university boards, but by an independent body.
Australian vice-chancellors are among the highest paid in the world for the position, with average salary often above $1 million.
"The salaries of vice-chancellors should be set by the remuneration tribunal and not university boards in this cost-of-living crisis," Senator Henderson told the Universities Australia Solutions Summit in Canberra on Wednesday.
"The current situation, frankly, does not meet the pub test."
Ahead of a federal election, Senator Henderson said universities needed to put domestic students first and improve experiences and safety on campuses.
"For too long, universities have relied on a business mode which yielded them eye-watering revenues, but which are not sustainable or in line with expectations of the Australian community," she said.
The education spokeswoman used the address at the summit to call for a publicly available performance index for tertiary bodies to be set up to better inform prospective students about outcomes.
"Rather than judge universities on the research dollars they generate ... let's focus on home-grown performance," Senator Henderson said.
"This reform will drive competition, lift teaching standards and ensure students make informed choices about their education."
It comes as Education Minister Jason Clare announced a tertiary education commission would be established to oversee reform in the sector.
The commission was a recommendation of the university accords, a wide-ranging document on changes to higher education.
The commission will be set up on an interim basis from July, with the aim to be fully operational by early 2026.
Mr Clare said the commission would help to drive long-lasting change.
"(The commission will) help break down the barriers between TAFE and university, help implement the funding model and provide advice on pricing and a lot more," he said in the speech on Tuesday night.
However, Senator Henderson labelled the commission as an extra layer of bureaucracy.
"The hard work you would expect a government to undertake is being sent to the (commission). Surely this is core business for the minister and the department," she said.
"Why is this being outsourced ... there's no proper understanding of the (commission's) role, no legislation."
Meanwhile, Universities Australia chief executive Luke Sheehy has claimed households would be $20,000 better off in coming decades if targets for additional students are met.
In a speech to the National Press Club on Wednesday, Mr Sheehy will say universities have been urged to provide one million domestic student graduates by 2050, but funding has not been adequate to support the outcome.
"We're told this target could add as much as $240 billion to the economy by 2050," Mr Sheehy will say in the speech.
"Every Australian household will be $20,000 better off because of a fully skilled workforce by 2050. Every Australian can get around that. It's a dividend worthy of bipartisan political support.
"Australia's universities need to be growing to skill more Australians, not potentially contracting."
Ahead of the upcoming federal election, Universities Australia has called for a federal education investment fund, which was abolished in 2019.
Mr Sheehy will say the fund would help universities to expand and cater to future students.
