The University of Tasmania (UTAS) has announced it will set up a new education research centre to fight back against state's poor retention rates.

In the state with Australia’s lowest retention rates, where less than half of all high school students actually finish, there is a serious problem to tackle.

The University has struck a deal with the Tasmanian Government, with its funding also coming from philanthropic donations.

The centre will investigate ways to students children by researching barriers to education aspiration and attainment.

It will also organise activities to enhance the perception of education in the community, targeting areas of disadvantage.

The deal is very similar to one proposed by Tasmania’s opposition last year.

University vice-chancellor Professor Peter Rathjen said the centre will address “the issues which are holding Tasmanian children back will take many years to improve”.

He said the state's poor educational outcomes came from economic circumstances, geographic isolation and the low educational standards of older generations.

But the Education Union is sceptical.

It claims the $4.2 million funding for the centre comes from other parts of the Education budget, specifically out of money that was supposed to be for Gonski programs.

Economist and prominent Tasmanian Saul Eslake says something had to be done.

“Tasmania's experience over decades suggest that simply spending more money on more teachers is not the right way to go,” he said.