Recovery and reform

Higher education has been severely disrupted by the COVID-19 pandemic. Loss of international student revenue has resulted in major spending cuts by universities. The big questions are how quickly will the sector rebound and will it play a leadership role in the recovery from the recession?

Two key factors will shape this: the speed and scale with which new international students start coming back into Australia; and the policy and funding arrangements for domestic students. There has been progress on both fronts in the last ten days.

First, the national cabinet has committed to a pilot program to bring international students from overseas. This is very important.

Second, the federal Minister of Education, Dan Tehan, has released his plan for the funding of domestic students. More time is needed to assess the detail, but overall the plan will result in a higher growth rate of funding for universities to support a higher participation rate than would otherwise have been possible. The government should also be commended for acknowledging that growth is especially needed in outer-metropolitan areas.

With the higher rates of growth of school leavers in coming years, and with the recession causing higher unemployment, a large increase in student numbers will be required for young people to have reasonable employment prospects. And if student numbers don’t grow fast enough, inevitably those from disadvantaged backgrounds will suffer most. There should also be an increase in mature age students to ensure the upskilling and reskilling that will be required.

The increased funding to enable expansion of student numbers is unlikely to be enough, but it is at least a start. It comes from increased student contributions. We are fortunate to have an income contingent loan system so that increased contributions are deferred until graduates earn sufficient income.

It is clear that the Minister is seeking, at this stage, to ensure growth in student numbers within his existing funding envelope, relying on the HECS-HELP system to fund it. We are, however, close to exhausting that option and will need to find other ways to finance the additional investments that will be required, though income contingent loans should be used more in the vocational education system.

The biggest doubts about the plan concern the wider variation in subsidies across discipline areas. The associated increase in variation in relative prices to students is the most controversial aspect. And even if you do believe in picking winners, while students studying teaching, nursing and engineering, for example, will pay lower prices and students of business, law and especially social studies, political and behavioural science, will pay more, it is unlikely that these changes will cause substantial demand shifts.

One of the positives, however, is that now a rationale exists for the total funding per student by subject, as it is based on measured costs of provision.

Another thing recognised is the importance of work-integrated learning. A next step should be providing support to employers to take on students and graduates for work experience and employment, in internships and cadetships, extending the current apprenticeship subsidies to wider range of learners and courses. This could greatly help to grow jobs and skills.

A significant factor in the response to the effect of the pandemic on the sector, is the role of state governments. A number of state governments, especially Victoria, have committed significant investment in the recovery of the higher education system. In Victoria, a $350 million investment fund for infrastructure and research projects, and a $45m international student support fund are on top of a deferral of payroll tax.

Australia’s federal system is coming out of this crisis well. While it is on a roll, the next thing is to deal with interface of the higher education and vocational education systems. Higher education is primarily the responsibility of federal governments although universities are largely established under state legislation. Vocational education is primarily the responsibility of the states although the federal government provides funding to these systems.

The big issue for the future success of the whole tertiary education system is to achieve a more joined-up tertiary sector, with more coherent funding, qualifications and curriculum frameworks. Minister Tehan has stated that reform of the Australian Qualifications Framework, as proposed by the COAG review team will proceed. This is a good start.

The next thing is to promote federal-state reform of funding, pathways and curriculum in both vocational and higher education, so that anyone who needs access to vocational or higher education or a combination, can affordably obtain it in a way that is neutral between the two sectors, is easy to negotiate, and provides students with the skills they need. This is a big task, and will involve substantial growth of the whole tertiary sector in the years ahead. But it is a very important priority for the future success of the economy and the society.

Peter Dawkins is Vice-Chancellor and a Professor of Economics at Victoria University.

First published in The Australian, 25 June, 2020.