19/01/2015
It is an honour to be invited to make one of the first contributions to CEDA’s higher education blog. While I have just retired as vice-chancellor of Flinders University I remain passionate about the future of Australian higher education.
Australian higher education is certainly facing change. However change is not something new to universities. Indeed one could say that change in higher education is the norm.
The latest changes came with a dramatic announcement in last year’s Budget by Minister Pyne that universities would be further deregulated and allowed to set their own fees but with students still able to access Fee-Help so avoiding any upfront charge.
The ‘price’ of this freedom was a reduction of 20 per cent in the Commonwealth contribution, meaning that on average student contributions would need to rise by approximately 30 per cent just to maintain current funding.
The reforms also opened the Commonwealth contribution to private providers (with the aim of asserting competitive pressure on fees), extended it to so-called sub-bachelor awards and adjusted loan repayment conditions.
Late last year the Senate rejected the required legislation to pass these reforms.
Minister Pyne reintroduced a slightly modified bill that will be reconsidered by the Senate in the 2015 autumn session.
Will it pass? The answer lies with the cross-bench senators.
Universities Australia (the university peak body) has consistently argued for passage with amendments most significantly reducing the Commonwealth ‘claw-back’, retaining the consumer price index (CPI) interest rate on student loans (conceded in the new bill) and a ‘structural adjustment’ package.
While increased Commonwealth investment may be desirable, given the fiscal outlook of the Commonwealth and no willingness to raise taxes, the Universities Australia position appears to be the only responsible way forward.
How has higher education policy evolved?
In the 50 years since I entered the University of New South Wales as a first year student several periods of significant reform have driven growth in universities.
In 1965 I joined approximately 70,000 students enrolled at nine universities.
This year over a million students will enrol at 37 public universities, two private universities and an increasing number of private institutions.
A pivotal moment in higher education happened during my first academic appointment—as a lecturer at UNSW—in 1974, when Whitlam abolished fees and took over the funding of university education from the States.
I took my first step into senior university leadership—as Dean of the Faculty of Science at the ANU—at the height of the reforms launched by the then Commonwealth Minister for Education, John Dawkins, in the 1980s.
Those reforms dramatically expanded the number of universities by incorporating the old institutes of technology and colleges of advanced education with the existing universities into a single ‘Unified National System’ that is essentially the system we have today.
Dawkins’ reforms saw the re-introduction of student fees but now with an income contingent loan scheme—the Higher Education Contribution Scheme (HECS now FEE-HELP).
Designed by an ANU economist, Professor Bruce Chapman, HECS is one of the greatest innovations in public policy that has been emulated in a number of other jurisdictions. Under Fee-Help students do not pay up front but receive a loan from the Commonwealth that is repaid (as an income tax surcharge) when their income reaches a certain threshold.
Dawkins’ reforms also freed universities to recruit international ‘full-fee’ students. The result is today’s international education market that has become Australia’s largest service export industry worth in excess of $15 billion dollars annually. This makes it Australia’s third largest export earner exceeded only by iron ore and coal.
The next great reform, during the first Rudd-Gillard Government, coincided with my appointment as a vice-chancellor—not that I am implying any cause or effect!
Following a landmark review by Professor Denise Bradley, Julia Gillard, then Education Minster, introduced the ‘demand driven system’ (DDS) under which the Commonwealth would fund all Australians who wished to enter university in whatever course (apart from medicine) they chose.
Prior to the DDS each university had a maximum number of ‘Commonwealth funded places’.
The public policy objective of the Gillard reform was to lift university participation, particularly from lower socio-economic groups that were less represented in higher education.
Universities and students responded with Australian undergraduate enrolments rising from 440,000 in 2009 to 541,000 in 2013.
To fund this load Commonwealth expenditure is expected to rise from $4.6 billion in 2009/10 to $7.2 billion in 2016/17. And this is the sting in the tail.
While the DDS was probably never financially sustainable, university funding became a major political issue as the Commonwealth budget deteriorated and vice-chancellors argued that existing funding was inadequate.
The result is the reforms before parliament.
Looking back over 50 years of reform two conclusions seem inescapable.
First, the current set of reforms will not be as dramatic as opponents fear. Universities will adapt and continue to innovate.
Second, those that are most enthusiastic will not find utopia.
Rather new issues will emerge and change will need to continue. Indeed one is already entering the debate: research funding and particularly engagement between business and academia. A report last year by the Australian Council of Learned Academies found that only 3.5 per cent of Australian firms collaborate with universities; the worst rate in the Organisation for Economic Co-operation and Development (OECD).
That is why it is important for CEDA to continue encouraging debate on Australian higher education since our universities are critical to the economic future of Australia.
Editors note: CEDA's blog aims to encourage public policy debate and harness the ideas of leading thinkers. In 2015 the CEDA blog will examine a mix of key topics on the economic and social issues facing Australia.