AUSTRALIA: World first for federal endowment fund

The Australian government has established the world’s first higher education endowment fund specifically aimed at providing money to meet the capital costs of universities and to create specialist research centres.

The A$6 billion (US$4.9 billion) fund will initially allocate more than $1 billion to the nation’s 38 public universities between 2008 and 2011. This far exceeds a call by vice-chancellors for the government to increase spending by $500 million over three years.

Vice-chancellors have been complaining for years about crumbling laboratories and out-of-date equipment while pointing out that they lacked the money needed to attract top-class academics and to keep their best researchers in Australia.

Education Minister Julie Bishop said the "unprecedented" investment and other measures announced by the government would "fundamentally reshape the higher education landscape". Bishop said the new investment would promote excellence, quality and specialisation in Australian universities for years to come, helping institutions “to become truly world-class".

The government had initially announced a $5 billion fund but added a further $1 billion after its budget surplus blew out to $17.3 billion earlier this year. The fund will be further boosted from future surpluses so the total could amount to a staggering $50 billion within a few years. The capital component of the fund will be invested to maximise the earnings available for distribution.

Universities will receive funding according to the extent they meet government policies with regard to “diversity, specialisation and responsiveness to labour market needs”, Bishop said. Other factors to be considered will include whether universities have been able to raise matching funds from state or territory governments,

A growing number of countries have established funds to invest budget surpluses but most are intended to meet the costs of a particular liability such as public service superannuation payments. The Singapore government has an Investment Corporation that is simply intended to generate earnings to protect the wealth of future generations. New Zealand and Norway also have future funds, while Sweden had established half a dozen, all competing with each other.

The national committee of vice-chancellors, now known as Universities Australia, said the additional money would be most welcome. Committee chair Professor Gerard Sutton said that, on the basis of the returns universities made from their own investments, the extra $1 billion allocated by the government would return about $100 million a year, bringing the total return to $600 million.

“I think they've deliberately budgeted conservatively and I think that's a responsible thing to do," Sutton said.

Bishop said the extra money that would be injected into the higher education sector more than doubled existing financial investments and endowments currently held by universities.