Funding for vocational education and training (VET) is at its lowest level in more than a decade and Australia risks failing to properly provide the high-quality training for the 45% of new jobs needing VET qualifications that will be created in the next five years.

The report from education policy think tank the Mitchell Institute at Victoria University found that every state and territory government had cut funding* to VET over the past decade, with funding falling to 15% below 2006 levels.

New South Wales has experienced one of the largest declines in recurrent funding of 21% in real terms compared to 2006, while Victoria has seen its funding almost halve since 2012.

Peter Hurley Education Policy Fellow from the Mitchell Institute at Victoria University warned that the funding crisis was making it especially difficult for quality VET providers to sustain high course standards.

If we want to ensure a quality education for our VET students and to meet the growing demand for skills for industry, it will be important for governments to increase funding for VET courses.

As per course funding has declined across all states and territories, and access to income contingent loans has become restricted, students have faced high upfront fees, making the sector a less cost-effective training alternative to university. 

New South Wales has experienced one of the largest declines of 21% in real terms compared to 2006 recurrent funding, while Victoria has seen its funding almost halve since 2012.

Mr Hurley said per student funding for courses needed to be boosted and support for students expanded so that VET students could defer costs in the same way that university students could.

This change would reduce the upfront costs to students significantly and allow them to access VET education.

“Student choices about what to study and where are too often driven by factors such as course fees, or the availability of loans, rather than their strengths, interests, or job prospects on graduation,” Mr Hurley said.

More equitable funding and student support between higher education and VET would allow more students to make better choices.

While state governments have reduced VET funding, the Federal Government initially increased it via the VET FEE HELP program. Concerns about financial sustainability, quality of courses and rorting by some unscrupulous providers saw the Federal Government’s scheme close and be replaced by VET Student Loans. Excluding the income contingent loans scheme, the Federal Government’s commitment to the VET sector has been relatively constant over the past decade, although it fell in 2018. Funding increased in some states in 2018 for the first time in six years.

The report recommends:

  • Removing the artificial divide between higher education and VET so students can study at both without penalty and receive the training and skills they need.
  • Reforms that enable VET students to access the same level of support as university students, such as the ability to defer payment for all out-of-pocket costs via income contingent loans.
  • Greater coherence between state and federal governments and long-term commitment to funding to allow for stability, sustainability and improved quality in VET.
  • Establish an efficient benchmark price for each VET qualification. This will stem the rise of low cost, low quality courses, and lead to higher quality, efficiently funded courses.
  • Limit contestability to prevent unscrupulous operators with no previous experience, capital or quality courses from entering the market and profiting while leaving students with high debt and poor quality, ineffective qualifications.

*Recurrent funding

**Adjusted for CPI.