Australia's tertiary education funding system is distorted, unfair, creates the wrong incentives and needs to be dramatically overhauled, Business Council of Australia CEO Jennifer Westacott will tell the National Press Club on Wednesday.

On the eve of the Turnbull government's higher education funding reforms being debated in the Senate next week, Ms Westacott will release a BCA discussion paper that goes much further. She will urge root-and-branch reform that puts funding in the hands of consumers and corrects an imbalance that favours universities over TAFEs and vocational colleges.