Universities Australia chair Carolyn Evans told the National Press Club it would be "madness" to put the decision-making power in the hands of a central authority as the entire nation charts a way forward.
"We need to trust the fact that our universities have a lot of experts in AI, have a lot of experts in teaching and assessment," she said on Wednesday.
"We do talk to each other, we share best practice. That is a much better way of going than trying to have some bureaucratic, centralised approach to the issue."
Professor Evans said universities were experimenting with alternative assignment formats to avoid outsourcing our capacity to think to AI and defended long essays as a way to foster deep thinking.
"It's sort of push-ups for the brain, even if you don't ever write a long essay again, it's got those muscles working," she said.
With excessive regulation and government meddling suffocating the university sector, Prof Evans also called for greater autonomy and a considered debate over international students, a major source of revenue.
Her state of the sector speech acknowledged there might be good reasons to reduce the number of international students, but suggested the current political debate was ignoring significant consequences.
Labor, the coalition and One Nation have declared an intention to cut migration figures, with each party setting its sights on different visa holders.
One Nation and the coalition have committed to significantly reducing the intake of international students as the solution to meeting lower migration targets.
In her speech, Prof Evans warned of the ripple effect of such a policy to health, aged care, tourism and long-term diplomacy.
"What's the plan for the financial sustainability of our universities? Will the taxpayer resume responsibility for them or will we as a nation happily see thousands more job losses and the closure of small campuses?"
Universities and academics criticised the coalition's plan to cut Australia's migrant intake in May, warning it would hurt the economy and cost jobs.
The sector relies heavily on foreign students who can be charged much higher fees to cover costs such as compliance, infrastructure and research.
Prof Evans has also called for a lighter touch on university regulation.
"When governments seek to regulate our media, the democratic threat is recognised, and so questions are asked and debated as they should be. The same is not true for universities," she said.
