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Our expanded higher education sector is delivering, but who should pay for it?

Late last year, education minister Christopher Pyne announced a review of Australia’s demand-driven system (DDS) of higher education. Pyne wants to know if it is: Increasing participation (particularly…

A financially sustainable higher education sector is one that meets costs through a combination of user charges and government revenue. AAP/Paul Miller

Late last year, education minister Christopher Pyne announced a review of Australia’s demand-driven system (DDS) of higher education. Pyne wants to know if it is:

  • Increasing participation (particularly for disadvantaged students);
  • Meeting the skills needs of the economy;
  • Encouraging universities to adopt “market” behaviour (innovation, choice, competition);
  • Not affecting educational quality; and
  • Financially sustainable.

Thirty of Australia’s 37 public universities have made public submissions. Analysing them helps show whether Pyne’s final decision – due in only a few weeks – will be in harmony or conflict with the sector’s advice.

Increased participation

In preparation for the DDS, universities started to accelerate domestic undergraduate enrolments in 2009.

Overall, the number of undergraduate domestic students increased from around 550,000 in 2008 to over 660,000 students in 2012. This is an increase of 20%.

Increased participation for disadvantaged students

Students from low socioeconomic backgrounds, students with disabilities, Indigenous students, regional students and non-English-speaking background students saw small gains in their share of the education pie. Remote students, however, experienced a small decline.

The proportional increases are welcome, but less than hoped.

While the DDS makes extra places available, it is often the extra-funded outreach and support programs that get students applying and support them when they get into university. Most of these programs are targeting primary and high school students, so the review has been called too early to tell whether these are having an effect.

Supply and demand for skilled professionals

It’s too early to prove correlation between labour needs and graduate supply. Nonetheless, ten universities, such as the University of Western Sydney and Flinders University provided examples of increased offerings and/or enrolments in courses aligned with national skills shortage areas.

The sector believes the DDS allows it to react to changes in labour demand more quickly and accurately than when supply is planned and managed by the Commonwealth.

However, 27 universities – for example the University of Newcastle – recommend the DDS be expanded to include sub-bachelor courses, arguing that these are often more effective than bachelor degrees in supplying skilled workers in certain areas of national skills shortage.

Encouraging market behaviour

While the marketisation of Australian higher education has been occurring for several decades now, it appears the DDS is pushing it further. All universities are responding to student demand and many are offering new courses.

Additionally, some universities point to organisational restructures as evidence of sensitivity to the market. Other examples include developing new resources to support students, reacting to new student markets and entering into new industry or community partnerships.

The most common change to behaviour has been the development of new modes of learning, such as Massive Open Online Courses.

Online courses are changing learning methods across the university sector. AAP/Dan Peled

Not compromising educational standards

Not one university argued that the DDS was lowering academic standards. A handful (five) implied that it might lower standards at other universities (not theirs, of course) but offered no evidence to support their inference.

So, why is there so much angst on this topic?

Media attention is mostly on the Australian Tertiary Admission Rank (ATAR). However in their submissions, universities focus on student attrition and progression rates. As I have previously argued, this is a better way of considering how quality might be measured in higher education.

Since universities started expanding in preparation for and after the implementation of the DDS, the overall decline in progression and attrition rates has been negligible.

Furthermore, there is no apparent correlation between universities that have expanded a lot and their specific attrition/progression rates. For example, despite increasing commencing domestic undergraduate enrolments by more than 46% between 2008 and 2011, Swinburne University saw its corresponding attrition rate improve by more than 6%. This is not an isolated example: the same trend was evident in another 15 universities.

Ultimately, it’s the quality of the graduating student that really counts, but the review has come too early for this data to be available.

Is it financially sustainable?

This is the billion dollar question. A financially sustainable higher education sector is one that meets costs through a combination of user charges and government revenue. More students means income from one or both of these sources must increase. Not adjusting either means student numbers must once again be capped.

Five universities recommend that the government cap funding to the sector, but allow universities freedom to offer whatever courses they wished within the funding envelope. This would create a different kind of demand-driven system, where universities are free to meet student demand but only until the money runs out.

Three universities argue that demand will soon plateau, so the government will be able to budget with great certainty for the future. Five universities recommend deregulating fees further, in some cases up to allowing universities to charge full fees. The remaining universities are silent on the subject, which suggests they hope the government will continue to fund demand.

The final decision the government makes will be partly ideological, partly pragmatic, and partly influenced by the reviewers' recommendations. Though ideally not in that order.

When making its final decision, the government will hopefully consider that a public university is neither a wholly public good nor a wholly private good. It is a common resource whose benefits are realised individually and collectively, with an emphasis on the latter. It should be funded accordingly.