Labor's higher education spokesman Kim Carr has warned revelations of widespread cheating in the nation's universities will do serious damage to Australia's international reputation unless swift action is taken to stamp out the problem.

Senator Carr described as "disturbing" Fairfax Media revelations that up to 1000 students have hired a Sydney company to write their essays and assignments and sit online tests on their behalf.

"The reports themselves are disturbing, but what is damaging is if this matter is allowed to fester and is not dealt with immediately by the individual universities," Senator Carr said.

On Wednesday Fairfax Media exposed an online business called MyMaster, run out of Sydney's Chinatown, that had provided more than 900 assignments to students from almost every university in NSW, turning over at least $160,000 this year. The website has since been taken down.

In response to the revelations, whistleblowing academics have accused their universities of contributing to systemic cheating by welcoming international students who are "functionally illiterate" because they rely so heavily on their fees.

Some academics claim they have urged their university leaders to raise the English proficiency requirements but their concerns have been largely ignored because they are at odds with financial imperatives.

Senator Carr said the Federal Government had a responsibility to protect Australia's international reputation for education.

'In the first instance, it's up to the universities to clean up the mess, but it's up to the Commonwealth to ensure that that actually happens," he said.

International education is worth $15 billion a year to the Australian economy, and is the nation's fourth most valuable export, following iron ore, coal and gold.

Senator Carr said the problem of falling standards was an issue for Australian students as well as international students, adding he was deeply worried about universities enrolling students who did not have a reasonable chance of succeeding simply to attract funding.

"I am genuinely concerned about the quality of university entrants in Australia," he said.

He said while entry standards were properly a matter for individual universities, "they can't afford to allow their standards to slip simply to secure more revenue."

Senator Carr rejected a claim by Greens higher education spokesman Lee Rhiannon that Labor shared part of the blame for sliding standards because it had underfunded universities.

He said under the Labor Government of which he was a member, university funding had been increased by almost 100 per cent.

Senator Rhiannon said "coalition and Labor governments have underfunded our universities for decades, making them more reliant on student fees, particularly international student fees."

"Universities have a direct financial incentive to enrol as many high fee paying international students as possible, without working to ensure they have the support and resources required to study effectively."

"Instead of treating international and domestic students as cash cows it's time the government properly funded higher education, reduced the financial burden on students and encouraged universities to provide adequate student support programs," Senator Rhiannon said.

Education Minister Christopher Pyne said on Thursday: "This is a matter for the universities and the Government is confident that the universities will handle this appropriately".

On Wednesday, a spokesman for Mr Pyne said there would be "very severe consequences" for those caught cheating. The spokesman said the federal government wanted to encourage more international students to study in Australia.