A federal parliamentary committee has called on universities to train students and staff on foreign interference, and provide "transparency" on the risks.
A body should be established to crack down on the intimidation of students on-campus and the reporting of higher education staff and students to foreign embassies, under recommendations made by the intelligence and security committee.
This body should urgently provide clear guidelines to universities on how to introduce penalties for instances of foreign interference on campuses.
The inquiry looked at safeguarding taxpayer funded research and student safety on campus.
The recommendations are targeted at securing sensitive, taxpayer-funded research and protecting student safety on campus.
Recorded incidents of harassment, intimidation, and censorship due to foreign interference on higher education campuses would be published in a report each year - and would include the response taken by the university.
Universities that choose to have Chinese government-funded Confucius Institutes, language and culture centres, would be required to publicly disclose funding arrangements and the details of the agreements.
They should also be able to have the "final say'' about the appointment of staff and curriculum content, and that robust academic freedom and free speech clauses be included in any agreement.
Committee chair James Paterson said more work needed to be done to protect research and students.
"There's no question that students and academics have faced a sustained campaign of intimidation, harassment, censorship and intelligence gathering by foreign state governments," Senator Paterson said.
"This resulted in the transfer of sensitive research to authoritarian regimes and their militaries and threats to the safety of domestic and international students."
The foreign affairs minister has been asked to decide whether to dump a $10 million contract between Monash University and COMAC, a government owned aviation company that has been sanctioned by the US.
Human Rights Watch Australia researcher Sophie McNeill said the measures ensured universities have "clear policies in place to counter state-backed harassment and intimidation".
The committee also recommended banning employees of government departments and agencies from participating in talent-recruitment programs.
