During 2002, the Australian Education Minister conducted a year-long review of tertiary education under the title "Higher Education at the Crossroads." The policy statement arising from that review was released on 13 May 2003. It incorporates a combination of new financial incentives on students and universities, potential expansion of full-fee places, and increased intrusion into university priority setting. The policy statement promised a $A1.5bexpansion in funding over four years, with more fully-funded university places, and an emphasis on improving the quality of teaching and learning. The strategy is market-driven and could create a "fee-culture" in Australian universities. Implementation of the new policy is not assured as it has to pass a hostile Senate. The implementation process also carries risks for government and universities. This paper describes the government's proposals and analyses their premises and effects.