Australia's 38 public universities lost an estimated A$800 million (US$568 million) last year as a result of the global financial meltdown. With the nation now officially immersed in a recession and higher education institutions facing the prospect of an even more serious decline in revenues, vice-chancellors are looking to the federal government and next month's budget for a substantial boost in spending.

The release last week of an economic report highlighting higher education's value to the national economy has given university leaders some confidence in a positive budget outcome. That plus the fact the Labor government is committed to an "education revolution", which includes increased funds for univerisites, as well as its endorsement of the recommendations from a higher education review that called for an additional $6.5 billion over the next four years.

The economic report, by the giant accounting consultancy firm KPMG, used different forms of modelling to demonstrate that Australia's real GDP would increase by an average of $1.6 billion a year over the next decade, then accelerate to $38 billion more each year in the 2020s, if the review's recommendations were adopted (see the report Higher education confers huge economic beneifts in this issue).

Meantime, however, universities are having to monitor closely the more than $6 billion in annual revenues estimated to be vulnerable as a result of the global recession. Last year's $800 million loss was incurred from falling share market and investment returns, consultancies, bequests and donations, lower interest rates, and a possible drop in income from postgraduate student fees.

But Universities Australia, the vice-chancellors' collective, said the core sources of revenue that comprised two-thirds of the $19 billion total annual expenditure on higher education remain secure and that this year's losses were likely to be markedly less than those incurred in 2008.

"Most universities have managed these at-risk sources of revenue conservatively; they realised all along they were market sensitive and while these did support important areas of activity, they were not part of the core which could have been compromised," UA Chief Executive Dr Glenn Withers said. "Universities have been pretty good risk managers."

Withers said that if the government accepted recommendations of the Bradley review of higher education and allocated $6.5 billion more to universities over the next four years, this would boost federal contributions to higher education by 22%.

With demand for university degrees rising among Australian and foreign students, and enrolments on the rise, plus the need to provide indexation increases, it was possible that total federal contributions could exceed $9 billion in 2009-10, Withers said.

Federal Education Minister Julia Gillard said last week the government had already committed $1.7 billion to improving university infrastructure. Gillard was at the Curtin University of Technology on Wednesday to tour facilities soon to be upgraded through the government's $500 million Better Universities Renewal Fund which, within the acronym-prone education ministry, is known as BURF.

Curtin received almost $14 million to refurbish its chemistry building and create an integrated suite of research and teaching laboratories as well as additional facilities for the health and life sciences. Gillard said that in just over 12 months, the government had delivered more than $1.5 billion in higher education infrastructure, $600 million more than the previous government had provided in more than a decade.

In words certain to bring comfort to vice-chancellors, she said: "Unlike the previous Liberal government, this government understands the need to invest in education for the long term prosperity of the nation...Higher education reform is a key element of the government's Education Revolution".

Withers said that on top of the extra infrastructure spending, the budget could also provide at least a portion of the $1.6 billion a year proposed by the Bradley review.

"Our initial worries concerned those vulnerable areas where universities may have taken the biggest hits and that they might continue into this year," Withers said. "But we are now expecting a gradual recovery and we believe we are managing well to allow for those market sensitive losses plus we are expecting the government to do more than they have in the past."

Australia would not be alone, of course, if it does decide to increase spending on universities even if that pushes the economy further into deficit. The Obama administration in America has promised increased resources for higher education, as have France, Germany, China and India - the latter two countries even before the real seriousness of the global economic collapse was evident.

"Australia should try to match these other countries or our competitive position will erode," Withers said. "I would argue that if you don't lubricate the process of reform, you don't get the reforms that Bradley wanted: namely, tertiary integration, quality assurance and accreditation arrangements. If you try to do that without increased funding, you won't get much reform."

geoff.maslen@uw-news.com

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