CANBERRA, Sept 6 - The University of Melbourne (32nd) and the Australian National University (48th) again top local entrants on the Times Higher Education World University Rankings, released overnight.
All up, 35 of Australia's 40 universities made the rankings.
Out of these, 11 jumped ahead, 14 held steady and 10 fell compared with their results last year.
By comparison, Chinese universities are rapidly climbing the rankings each year.
In 2017, Tsinghua University overtook the University of Melbourne while the Hong Kong University of Science and Technology now outperforms ANU.
"Australia's leading institutions are already falling behind peers in mainland China and Hong Kong, which receive high and sustained levels of state funding," global rankings director Phil Baty said.
"Funding cuts proposed by the government could seriously harm the country's institutions in future editions of the rankings."
Australia had to continue to invest in its universities and stay a welcoming place for international students and staff if it wanted to remain a key global player in higher education, Baty said.
The government wants to cut funding from universities in 2018 and 2019 and lift student fees.
Its proposed changes to temporary working visas have also raised concerns about the impact on academics and researchers coming to work in Australian institutions.
Education Minister Simon Birmingham said the results showed Australian universities punched above their weight on the global stage.
"These rankings highlight that Australia's university sector continues to go from strength to strength," he said.
"In a competitive world Australia and our universities cannot rest on their laurels. We need to adapt and respond to student needs and ensure our universities are set up for the future."
He insists the government's funding overhaul will maintain a strong level of investment in universities.
Opposition education spokesperson Tanya Plibersek called on the government to shelve proposed university cuts.
"We know that student education will be compromised," she told reporters in Canberra.
"They'll be expected to pay more, sooner, for a poorer quality education. We won't be attracting students from around the world if our university rankings continue to slide."