Universities – The creators of the new wealth of nations

Australia is a higher education exemplar. Making up just 0.3% of the world population, the country is home to 5% of the top 500 ranked universities globally – 16 fold above its size. On a per capita basis, its Group of Eight universities are better represented in the QS Top 100 ranking of universities across the world than the higher education giants of the United States and the United Kingdom.

The history of Australia’s universities began in 1850 when William Charles Wentworth sought to establish the University of Sydney to give “the opportunity for the child of every class” to become “great and useful in the destinies of this country”.

I share Wentworth’s vision and feel passionately about this objective being achieved in Australia, and on a global scale.

Working and travelling in many countries, I have witnessed the joy and satisfaction that educational opportunities – both academic and vocational – can bring to people of all backgrounds.

University expansion and economic growth

We have come a long way since Wentworth’s time. Outstanding universities have been critical to the social and economic success of Australia.

Globally, there is a direct link between periods of university expansion and periods of economic growth like the industrial and commercial revolutions. That trend continues today.

We are witnessing the massive expansion of universities in China and now India – alongside an extraordinary pace of economic development. It is indisputable that education is a key to breaking entrenched disadvantage and a major contributor to reducing inequality worldwide.

Adam Smith’s book, The Wealth of Nations – published in the 1700s – maintained that if individuals act in their own interests, the whole nation will benefit.

In his recent book The New Wealth of Nations, Indian economist Surjit Bhalla argues that the true key to prosperity today is providing individuals with an education.

As Bhalla notes: “The industrial revolution transformed lives – primarily in the Western world. But the education revolution has transformed lives all over the world.”

Today, 86% of the global adult population is literate, millions of people have been lifted out of poverty and human capital, achieved through education, is even more valuable, globally, than any financial asset.

Like financial assets, it yields an income and myriad other benefits. Unlike financial assets, it cannot be hoarded or lost and is a powerful force for equality.

Knowledge – the original renewable resource – is our most precious commodity in this high-tech world.

Life-changing, society-advancing endeavours are the fundamental contributions of our universities. But, as a sector, we are also rightly asked to justify ourselves in financial terms.

Education – a worthwhile investment

A recent independent report by London Economics on the impact of the Group of Eight universities found there are few more worthwhile investments in Australia today than higher education.

In 2016, it cost AU$12.4 billion (US$9 billion) to operate the Group of Eight universities, of which public funds from the government provided AU$6.7 billion (US$5 billion).

The London Economics report reveals that the work of the Group of Eight (Go8) delivered a return of more than AU$66 billion (US$48.5 billion) to the nation. That is a 10-fold return on the government’s investment.

That AU$66 billion return came from four areas: research, teaching and learning, educational exports and direct university expenditure.

Astonishingly, every one dollar of public funding spent on Go8 university research generated AU$9.76 across the rest of the Australian economy, a roughly 10-fold return for the Australian economy – and that is based on conservative methodology, as adopted by London Economics.

Clearly, funding research is an astute investment in the future.

But that is not where the impact ends. Every 1,000 jobs created within a Group of Eight university supports more than 2,400 jobs throughout Australia.

And while the Go8’s more than 100,000 overseas students bring a depth and breadth to campus life that is impossible to quantify, their economic contribution is clear: for every three overseas students studying at Group of Eight universities, AU$1 million of economic activity is generated in other parts of the Australian economy.

That is because overseas students go to cafes, restaurants and to see movies. They pay rent and bills, buy food and use public transport. And their friends and family come to visit as tourists.

According to the report, the average non-fee expenditure per student during the course of their studies is AU$51,000 – totalling AU$8.5 billion for the 2016 student cohort, supporting more than 29,000 Australian jobs.

Better communication

However, universities have not generally excelled at communicating their worth – and I believe that contributes to the current climate of criticism.

There is a perception – and not just in Australia – that universities have failed to adapt to meet contemporary needs. And there appears to be a lack of understanding of what universities offer their nations both socially and economically.

We have not taken the community – the taxpayers who fund so much of what we do – along on our journey.

We need to improve communication with the community we serve and make the value we contribute real to the public.

One powerful way to explain this is to show what that amount of money would allow the government to provide for the people on a yearly basis.

In Australia, it is sufficient to entirely cover welfare payments for the aged. It is twice the cost of Medicare. It is more than enough to pay for the government’s entire education budget or its entire defence budget. Such is the economic power of the education and research at just eight Australian universities.

Social impact

But beyond the dollars we must communicate the real-world social impact of universities.

A recent Science and Technology Australia survey showed that 94% of respondents believe science and technology is important to their wellbeing and 78% think we should be investing more in research.

So why is there a disconnect between that public support and real-world investment?

It is up to the university sector to communicate clearly the research that is being done, why it is important, and why they should champion the cause of research.

In Australia we have successfully built a university research base that is the envy of much of the world. But there is enormous potential in Australia’s research sector that remains untapped due to a gap between the discovery end of the research pipeline and the commercialisation end.

This pipeline is crucial to advances that change lives, create jobs and support a modern 21st-century economy and it is key to our ability to compete with emerging Asian nations and existing strength in Europe and North America.

However, not only has Australia’s investment in research and development (R&D) declined for the first time in two decades, but we lag internationally.

There have, nevertheless, been some positive signs of late, including discussion of a 20% R&D tax incentive collaboration premium and an Australian Translational Research Fund to encourage business-university collaboration.

The opportunity is clear provided that Australia can mobilise the investment required to generate the available return. We have to stop seeing the funding of research as tantamount to a charitable donation. It is not. It is a sound business investment and, more importantly, an investment in the future of the nation.

The London Economics report estimates that an extra AU$500 million invested in research in Go8 universities would generate a return of approximately AU$5.3 billion. If we increased R&D spend by 0.5% of gross domestic product (GDP), just up to the OECD average, the return would be much greater.


The Group of Eight universities believe it is time to forge a new relationship with government, business and the Australian people. In making this commitment we offer the London Economics report as evidence of our confidence in the economic value of education and research.

Our commitment is made as hubs of knowledge and independent thought, as champions of freedom, openness, human rights and justice and as a force for increasing prosperity and equality.

We believe that universities can serve society in navigating the challenges and opportunities of our age and we are committed to ensuring that Australia maintains its place as one of the most prosperous, advanced and socially responsible countries in the world.

We are also committed to ensuring that the general public understands, values – and takes pride in – the leading role of the higher education sector in driving social and economic progress.

Professor Ian Jacobs is vice-chancellor of the University of New South Wales and chair of the Group of Eight research universities in Australia. This is an edited extract [1,400 words] of a 3,600-word speech given by Professor Jacobs to the National Press Club in Canberra on 14 August 2018. For more on the complete speech, click on this link.