Who sets the standards in higher education?

In view of recent legislation to introduce the Tertiary Education Quality and Standards Agency in Australia, greater emphasis is being placed on the notion of standards in higher education. A standards-based audit or assessment implies that institutions need to demonstrate performance or achievement against a set of explicit thresholds. This paper explores the question of whether these standards, as a set of demonstrable thresholds, will be set by institutions, by TEQSA or by some other means? How will these thresholds be determined and who has the authority to set them? The paper makes reference to international policy settings and presents a theoretical construct for standards in higher education. The paper concludes by suggesting how the setting of external national standards changes the locus of power and control away from institutions.