Before the government handed down its budget last week, its spin-merchants had convinced the nation's higher education leaders they could expect little. So when the money appeared to be gushing towards them last Tuesday they were overjoyed and only later did they realise it would be years before they saw the flood of cash - if then.

The second budget to be presented by the Labor Party since it took office in November 2007 promised additional spending of more than $5 billion (US$3.8 billion) to expand student numbers and boost research. The first $2.6 billion will be allocated to university and vocational college infrastructure, with additional money flowing to counter the effects of inflation on university budgets and to meet more of the indirect costs of research.

By opening the floodgates to prevent Australia collapsing into a full-scale recession and an unemployment rate in double figures, the government will build up a deficit of $57 billion over the next two years. Part of its new commitments to higher education follow on from a review of universities it commissioned last year that called for an additional $6 billion to be allocated.

In response to this and its promise of an "education revolution" in universities and schools before the 2007 election, the government will provide almost $500 million to increase university enrolments by 50,000 and another $400 million to help universities prepare for a new deregulated environment where they will be required to target student numbers according to demand.

More than $100 million will also go to encourage universities to form closer links with schools and increase the proportion of students from impoverished backgrounds.

The reaction from the higher education community to this apparent largesse was ecstatic and unprecedented, at least since the days of the last big-spending Labor government in the early 1990s.

"Universities Australia applauds the government for delivering real outcomes for Australia through the university sector," declared the chief executive of the vice-chancellors' organisation, Dr Glenn Withers. "The government has acted responsibly and in the nation's interest by increasing funding for teaching and learning with improved indexation from 2012, which will ensure teaching quality is maintained and enhanced."

The Group of Eight research intensive universities were likewise gratified, saying, "The Rudd government has recognised the importance of investment in higher education and university research to stimulate and sustain economic growth. A number of well-directed budget initiatives will underpin excellence and concentration in university research, enlarge access and equity in higher education, promote structural change and lift Australia's competitiveness."

Education unions joined the chorus with National Tertiary Education Union President Dr Carolyn Allport similarly welcoming the budget outcomes: "Universities will be better placed to provide a quality education for the next generation of highly skilled workers, a critical part of the nation building agenda. It means the Australian economy will reap the rewards of increased investment in higher education," Allport said.

The devil, of course, was in the detail and the greater part of the $5.3 billion will only come on stream over the next four to six years. Increases in funding to meet some of the indirect costs of research, including equipment and salaries, for example, will not appear until 2014 while additional spending to make up for inflation rises will be three years away.

By the end of last week, the realisation began to sink in that these timelines meant a different government could be in power or that grim financial conditions might not evaporate as quickly as the government had forecast. Vice-chancellors began noting sadly that their ever-rising reliance on fees from foreign students to support their operations would continue well into the future.

As University of Melbourne Vice-chancellor Professor Glyn Davis told reporters, "The move towards full funding by research by 2014 is an important initiative although it will be some years before universities feel its full impact. Likewise, much-needed indexation for salaries is very welcome although it will not take effect until 2012..."

Postgraduate students acclaimed the increase in the stipend rate for those lucky enough to receive a government scholarship. The Council of Postgraduate Associations described this as "an important step toward ensuring the sustainability of Australia's capacity for innovation and for Australia's universities".

But, as Dr Rebecca Smith writes in our Research and Commentary section in this issue, PhD students have been forced to live below the poverty line for years and the increases the government has promised will not change that. "A $22,500 a year PhD stipend (tax-free) is not an adequate financial inducement for talented students who could earn double that amount, and more, by entering the workforce directly after their bachelor's degree," Dr Smith writes.

* See AUSTRALIA: Dirt poor PhDs live below the breadline in our Research and Commentary section this week.

geoff.maslen@uw-news.com

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