Higher education reform in Australia: a land far, far away?

As attention in England turns to the likely ‘major review’ of fees and funding, it’s worth considering the current – and turbulent – changes afoot in Australia. With comparable higher education systems and movement of people across institutions and agencies, there’s frequent exchange of policy idea between the UK and down under.

In Australia, there’s concern about the costs of education, the value demonstrated by institutions and an increasing interest in whether degrees are delivering financially valuable outcomes for students. Sound familiar? 

What’s all the fuss about?

Having failed to legislate university reform in 2014 and 2018 (due to the balance of power in the Senate), the Government has turned to its administrative powers to claim budget savings. On the verge of Christmas, the government released MYEFO – the Mid-Year Economic and Fiscal Outlook – the spring budget we might call it. An unwelcome present for universities were measures that require no parliamentary approval that will make around $2.2bn of budget savings. It also made political headlines.

The Government’s preferred headline: universities can no longer “write their own cheques.” In announcing the latest policies the Education and Training Minister Simon Birmingham said that the system “should recognise they have had enormous growth and should treat the announcement of a two-year freeze on funding as “an efficiency dividend by other means.”

That’s not quite how the sector communicated the message. Since 2011, the Australian system has been designed to deliver domestic undergraduate growth in participation, and it has undoubtedly done so. Previous reform attempts have been about who pays for that growth. These measures end growth by freezing the Government’s contribution towards teaching costs at each institution, a decline in real terms.

Universities Australia, the representative body, focused its feedback on the likely reduction to student numbers: “The cut would result in a smaller share of Australians having the chance of a university education in future. The decision to uncap student places in Australia was a historic reform that lifted skilled graduate numbers to meet Australia’s labour force needs and contributed to social inclusion… Under this freeze, even if a university simply seeks to maintain its current number of students, this would mean a real cut… for universities that are still growing their student numbers to meet the needs in their local communities and regional economies, this will be an even deeper cut,” said UA chair and Monash University VC Margaret Gardner.

What are the changes?

There will be a two-year freeze on the total Commonwealth Grant Scheme (CGS) funding for each institution from 1 January 2018, set at 2017 funding levels, for bachelor degree courses in 2018 and 2019. That might not sound too bad when you say it quickly – but the cumulative impact will lead to institutions to start planning for a real terms cut in funding in this forthcoming year with no guarantee of any uplift in the future. Literally, as school leavers received their results, the incentives to grow and compete for load disappeared and universities faced a total change in context. Compared to the uncertainty in England over funding in the near future – with the threat of the ‘major review’ looming – you might say a two-year freeze would be a real bonus.

Growth from 2020 would be capped at the growth rate in the 18-64 year old population, and subject to yet to be defined performance targets for universities.  Performance targets are, of course, part of today’s landscape.

The foreseeable consequences of these changes are likely to be highly inequitable in terms of locational and industry impact. Australia has always had equity issues between rural regions and the large cities. In HE participation in regional areas are between a third and a half metro levels.  The caps end growth in the very place where you might wish to stimulate higher education attainment rather than create even more reasons to move to the big (and expensive) cities.  Additionally, Australia has different fees by educational field, and different student and government contribution in each field.  Capped total government contribution is an incentive to switch load out of STEM and health and into business and law.

Some further proposals do require legislation. From 1 July 2018, revised repayment thresholds under the Higher Education Loan Program (HELP) that include a new minimum threshold of $45,000 with a one percent repayment rate to a second threshold at $51,957.00 (at two percent) and a maximum threshold of $131,989 with a ten percent repayment rate (some commentators are indicating the Labor party might let this through). It is never popular to change repayment thresholds for those who believed they had signed up under one set of conditions. The thresholds are, by English standards, high – currently they stand at close to $55,000 (£32,500).

However, the repayment schedules differ, rising from 1% at the lowest income level to the now proposed 10% on total earnings when total earning are above $131,989. The scaling has 18 repayment rates between the lowest income and the highest level. Also in contrast to England, the interest rate on loans is indexed to CPI which means that the debt shouldn’t grow in real terms, avoiding some of the claims of usurious practice seen over here.

From 1 January 2019, a combined lifetime limit for all tuition fee assistance under student Loans of $104,440 for most students and $150,000 for students undertaking medicine, dentistry and veterinary science courses (though again this requires legislation). Another interesting idea to have a lifetime limit for tuition fee assistance.

So what?

To balance the books, most Australian universities are likely to try and grow their income by expanding to an even greater extent, the recruitment of international students and services. This is big business, worth $28.6bn in 2017 to the economy. Not only is it the third largest export earner nationally but in several states, it is the largest earner. A squeeze on university finances should result in more aggressive competition for international students as Australia increases (again) its focus on a wide range of educational services.

More Australian universities will need to find new and novel approaches to the delivery of professional services. Many universities have already undertaken major ‘transformation’ programmes with considerable ‘dividends’ being released to invest in building research programmes. The experiences of undertaking these types of major change programme have lots of relevance to the UK.

New models of student support and digital delivery are already part of the landscape – with several universities being particularly leading edge (e.g. Deakin University). Expect to see even more mainstreaming of innovative approaches emerging using artificial intelligence and virtual reality.

What’s next?

Australia is at an interesting stage in the development of its higher education sector, and it’s grappling with many similar issues to the UK. And the interest in fees, funding and outcomes stretches – as it does in the UK – beyond HE to the full tertiary spectrum. Calls to rebalance funding between higher and further education systems is familiar to both countries. With plenty of policy exchange across the Australian and UK systems, it’s worth keeping an eye on what’s happening over there.

Wonkhe, Minerva and Ranmore are leading a Global Insights study visit to Melbourne and Sydney in April. This event will provide a real opportunity to have a deep dive into a wide range of institutions and government departments. Find out more here.