The head of the Commonwealth Tertiary Education Commission, Hugh Hudson, refused to fund the new institution, causing a standoff with the State, resolved only when the Commonwealth eventually agreed to a much smaller, unitary, stand-alone University College under the patronage of an existing university. Chifley University College was established by agreement between Bob Hawke and Barry Unsworth under the dual oversight of the University of Sydney (academic) and the Chifley University Interim Council (logistics and built environment). With the election of the Greiner Coalition government in 1988, however, the political will for a new university named after a historic Labor Prime Minister collapsed. Metherell and Dawkins, the new State and Federal ministers for Education (after much wrangling, and further review) agreed on a federated institution which would combine Nepean College of Advanced Education (CAE) and Hawkesbury Agricultural College.

The University began its legal life on 1 January 1989, with two Members of a federated system, growing to three when in November of that year Macarthur Institute of Higher Education joined the federation. Its first Chancellor was Sir Ian Turbott, a leading businessman and former colonial administrator; its first Vice-Chancellor was Brian Smith, formerly Principal of the Royal Melbourne Institute of Technology. While continually available, the Acting Vice-Chancellor at foundation, Professor John Ward from the University of Sydney, provided tactful, helpful advice until his untimely and much lamented demise in 1990.

The new institution grew rapidly – passing Dawkins’ 8000 EFTS viability criteria in the first year, rapidly increasing the numbers of young people opting for university education in the West, and more gradually raising the number of first preferences that the Members received through the Universities Admission Centre. Within five years, there were over 16,000 students at the university, and by 2000 over 23,000.

There were, however, two fundamental challenges. First, the University leadership needed to both renew itself, and to create a research culture which was quite at odds with the previous teaching/ applied culture of the Colleges of Advanced Education. Student growth provided the opportunity to hire new university-educated lecturers, many of them young and with ongoing research projects. It occurred slowly to the Member leadership that having staff who were researching was not the same as a research culture. Research offices were established, and political representation made so as to break into public funding circles. The latter was resisted by Canberra, which resisted the research aspirations of the younger universities.

It would be the best part of 15 years before the University had an effective cross-institutional framework that made research a whole-of-institution concern. The second major challenge also impinged upon the research agenda: there was effectively no common agreement as to the nature of the federation. With each Member competing for funds and racing to achieve separate strategic objectives, the flaws in the compromises which had established the University became apparent. Conflict between the Members rose progressively over the first five years breaking out into the open in 1995 when, with some local community support, UWS Nepean sought to secede from the University.