Universities and students lose out in ‘reform’ package

On 2 May, the Australian government announced a reform package which tells universities to take one for the country and get on with a reduction in funding (estimated at AU$2.8 billion billion or US$2 billion).

In return, the government says measures announced in the 2014-15 budget which haven't gone through Parliament, such as a cut of an average of 20% in government support for new student places from 2016 [which would have saved an estimated AU$3.5 billion] will be shelved.

The proposed measures are not reforms per se, but are ways to help restore budget credibility.

Students take a hit

For domestic students, fees are going up by 1.8% annually over the next three years. This means that the proportion that students pay for their own education increases from 42% in 2017 to 46% by 2021.

But there will also be a new, lower loan repayment threshold so that an estimated additional 183,000 debtors will start repaying their study debts a lot sooner. From July 2018, any person with a debt and who earns AU$42,000 per year will start paying back. The 2016-17 figure is AU$54,869. It appears that students from disadvantaged backgrounds, including low-income earners, will be the most affected.

Permanent residents (including New Zealanders residing in Australia) lose the opportunity to access a Commonwealth Supported Place – in effect they become domestic full fee-paying students. The government is painting this change as an opportunity for them to access the Higher Education Loan Programme, or HELP, when it is in fact removing a right they have had for decades. It is likely that many individuals in this situation will defer studies until they become Australian citizens.

These changes occur as the labour market remains weak following the global financial crisis and when full-time employment for new graduates is fast disappearing. The gap between the highest and lowest group (in terms of income and wealth) is increasing in Australia.

Performance-based funding

One measure that has not caught much public attention yet is that the government is introducing a performance-based element to the funding it grants to institutions to increase transparency and accountability. The government has reserved 7.5% of total Commonwealth Grant Scheme cluster funding (totalling AU$500 million in 2018) for this purpose.

Any 'Gen Z' student might say this measure is so 2000s and that instead AU$500 million in funding could be used to fund opportunities for students to gain work experience (with industry, public service or philanthropic organisations) and test and strengthen the generic skills they might gain at university. These efforts could promote a new wave of innovation and entrepreneurship.

This strategy is one that the government seems to favour. Over the years it has put various performance-based programmes into operation. For example, the Learning and Teaching Performance Funding (administered between 2003 and 2008) was designed to reward excellence and then expanded to recognise quality improvements made by institutions.

The programme proved ineffective, controversial and failed to gain legitimacy because it was resource intensive for institutions, relied on proxy measures and its methodology and approach were amended to suit changing agendas.

What it means

Both universities and students lose in the proposed set of measures. Should these measures go through the House of Representatives and the Senate it means that protracted negotiations are likely to occur between academic unions and university leaders to agree on employment conditions, including wage increases, as existing enterprise agreements expire.

The possibility of the much debated AU$100,000-degree fees price tag will be realised any time after 2032, depending on the outcome of all the economic reforms. A student who starts a six-year medical degree in 2018 will see their fees rise from AU$68,000 in 2017 to AU$71,900 in 2018.

The government reserves its right to take its share of universities’ surplus income, partly the result of an international student boom.

Universities’ dependency on income from foreign students continues to be the main source of non-government funding. In 2015, 19% of Australian universities' income came from international students compared to 6% in 1995.

For some years, government has also been using an ‘efficiency dividend’ to cut funding. Research and community service, while central to the universities’ mission, are left to linger as if they were luxury commodities rather than essentials.

Looking to the future

The set of measures announced misses an opportunity to address the long-term viability of Australia’s most visible export. I fear that educational services is rapidly becoming Australia’s new manufacturing industry. In 2012, I foreshadowed this possibility at the time of the vocational education reforms in Victoria. Trade liberalisation and regulatory reform brought a reduction in the rate of assistance to manufacturing from government from 35% in the 1970s to 5% by 2000.

This is not to say that a similar sharp contraction is likely to occur, considering that the Australian government’s support for higher education is about 58% at present. The government has, however, declared that it will reduce its contribution to 54% by 2021. Just imagine how higher education will look in 10-20 years’ time, given the geopolitical shifts occurring globally, combined with technological transformation (including automation) and the perils of demographic change.

In years to come, our neighbouring Asian countries will no longer be avid consumers of Australian educational services, but are most likely to become global exporters. It may be that some Australian students find it more affordable to study as an ‘out of state’ student in Oregon or in Beijing or Singapore.

As the Australian government faces a negative outlook regarding its ability to curtail expenditure – due to many mishaps, decreased revenue, political weakness as well as regional security instability – the possibility that the government will return to fund higher education at above the 60% rate as it did back in the 1990s is now non-existent.

Lastly, Australian universities will have a moment of reckoning, not in this year’s world university rankings as they are about to be released (June 2017), but for next year’s round. In 2016, 23 out of the 37 public universities were included in the Academic Ranking of World Universities or ARWU.

Angel Calderon is principal advisor, planning and research, at RMIT University, Australia. He is a rankings expert and a Latin American specialist. He is a member of the advisory board to the QS World University Rankings.