There has been much critical comment in recent years about the tensions between the regulation imposed on public universities and the flexibility needed to compete effectively in international and national markets for students and funding. In the partisan world of politics each side points the finger at the other as the author of "too much" regulation. Yet there is a shared set of underlying assumptions about the interplay between regulation and markets that has led to more regulation without necessarily improving the outcomes for or from universities. Australia has created a vibrant international education presence, now recognized as a major contributor to the economy as the third largest export earner in Australia. Australian universities have also become more flexible and responsive to changing student and industry needs. However, difficulties have been created by increasing competitive pressures between institutions while at the same time requiring more detailed regulation of what is done and how it is done. In this article, the authors discuss how regulation and financing arrangements should be redrawn to help achieve better outcomes from and for Australian universities. They contend that policymakers should reconsider the whole regulatory framework for higher education. Until regulation moves away from selective interventions and over-concentration on directing the behavior of Australian's "public universities," the benefits of an increasingly internationalised and significant sector for the country's future and economy will not be realised.