Budget relief for unis, but financial strain lies ahead

The ongoing decline in international students is placing Australian universities under financial pressure. AAP/Julian Smith

Anxiety gave way to relief across universities last night after Labor handed down a higher education budget that maintained indexation and delivered a $120 million increase to the overall research budget, lifting it to $1.72 billion.

University chiefs expressed delight at the announcement by Tertiary Education Minister Chris Evans, after higher education emerged as one of the few portfolios to be spared cuts. But many urged the Government to do more to protect the sector from the softening of international student numbers, and called on the Minister to respond to his own Higher Education Base Funding Review, which recommended a 10% boost in funding to ensure Australian universities remains internationally competitive.

Senator Evans announced that Labor would maintain its indexation rate of 3.8%, and would invest $38.8 billion over the next four years to support the decision to lift the cap on student places. Since 2007, there has been a 36% rise in students attending universities.

Senator Evans said the reform was allowing universities “to prepare the graduates the economy needs and giving more Australians the opportunity to get the high skilled, high paying jobs of the future.

"These reforms have resulted in 40,000 university offers being made to students from low socio-economic or disadvantaged backgrounds this year. This is a 19% increase since 2009.

"Australia needs a more highly educated workforce and we cannot afford not to tap into the talent of regional and disadvantaged students.”

Senator Evans said he would respond to the Base Funding Review in the second half of the year.

The budget included a $41.6 million increase in equity funding, an extra $53 million for the Sustainable Research Excellence in Universities program, and a further $54 million over four years to encourage a greater take-up of maths and science in schools and universities.

Curtin University Vice-Chancellor, Jeanette Hacket, said that although Labor had to be commended for protecting higher education funding “in the context of the very large budget savings that were implemented, there is still so much more to be done.

"I would strongly encourage the Government to proceed with further investment in the areas that have been identified in the Base Funding Review,” Professor Hacket said. Innovative Research Universities has forecast that it would cost $1.6 billion a year to implement the 10% increase in base funding recommended by the review.

“If Australia is to be internationally competitive, to maintain and grow its quality in higher education, it will need to address the base funding, which means that the indexation at 3.8% does not really put Australian universities in a position to be globally competitive in terms of quality,” Professor Hacket said. “And it does not keep pace with the real increasing costs in Western Australia.”

The impact of the decline in international students was increasing on universities, she said, and was going to place great financial pressure on the sector in the years to come.

The Group of Eight universities also applauded Senator Evans on the budget but said two major problems had not been addressed: inadequate funding per student and for research infrastructure.

Mike Gallagher, Executive Director of the Group of Eight, said universities needed extra resources to support less prepared students to complete their degrees. “The extra funding [to support low SES and under-prepared students] is a small first step in the right direction,” he said.

But despite the protection of funding in the budget, universities would face serious financial challenges in the years ahead.

“Funding per student is too low and remains under threat due to growing student numbers,” Mr Gallagher said. “The Government has not responded to the Base Funding Review that it commissioned.

"Funding for major research infrastructure under the National Collaborative Research Infrastructure Strategy (NCRIS) has terminated and has not been replaced. Meeting both of these challenges will be impossible without changes to financing policy.”

Simon Marginson, a Professor of Higher Education at the University of Melbourne, said that currently most higher education students were enrolled in programs where total funding - capped government subsidies plus capped student contributions - was below real cost.

That meant institutions were losing money on each new domestic student they enrolled – which inhibited the government’s own opening up of the system – or they ran down quality.

“Running down quality, for example by having larger classes and less contact with university teachers, weakens the future productivity of graduates once they enter the workforce,” Dr Marginson said.

“This is because their education will have added less value to their skills and knowledge. Running down quality also undermines Australia’s reputation in the global student market, which provides 18% of the funding of higher education.”