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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.

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21 Comments sorted by

  1. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    Thanx for this most useful overview of universities' submissions.

    I thought the Australian Catholic University's submission was quite interesting. Its section 3 has a good catalogue of examples of the extent to which the demand driven system has encouraged innovation, competition, diversity and greater responsiveness to student demand including the development of new modes of delivery such as online learning.

    Or what the economists call dynamic efficiency, which is a welcome example of jargon being more manageable than the general elaboration.

    https://submissions.deewr.gov.au/forms/demand-driven-funding-system/pages/item?SubmissionID=DFS1400080

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    1. Tim Pitman

      Senior Research Fellow at Curtin University

      In reply to Gavin Moodie

      Hi Gavin

      Yes, I also thought the ACU submission was highly detailed. It had the hand of Greg Craven all over it. Te examples were well-chosen, though I wonder what the universities selected thought of being cited in another institution's submission :)

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  2. ǝɔɹǝıԀ uɥoſ

    Speech Pathologist

    "Not one university argued that the DDS was lowering academic standards."

    Well, they would say that, wouldn't they? I don't see the use of asking Universities to make submissions on the system when their funding is at stake - you can only expect rose-coloured responses.

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    1. Tim Pitman

      Senior Research Fellow at Curtin University

      In reply to ǝɔɹǝıԀ uɥoſ

      Hi John

      If the universities had made the claims without backing them up I would agree. However the data provided did support their argument and correlated with the sector-wide analysis the National Centre for Student Equity in Higher Education conducted as part of its own review.

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  3. Sam Yates

    Research Fellow

    I have two chief concerns regarding this system:

    Firstly, with universities competing for students, we see them spending resources on marketing campaigns, advertising and the like. For the domestic student market, this is a zero-sum game, and the only people benefitting are marketing departments and advertising agencies.

    Secondly, programmes such as music performance are much more expensive to provide than the corresponding Commonwealth funding. We've already seen significant cut-backs in the quality of tertiary music education in Australia (some departments have effectively been gutted), and with this funding model, there is every financial incentive for this trend to continue.

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    1. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to Sam Yates

      It is true that universities spend more recruiting students which is diverted from teaching them or from research. However, this is no a zero sum game: new students are recruited to higher education, greatly expanding participation.

      I don't think the demand driven system is related to funding rates, at least not directly. Commonwealth funding rates - or, more precisely, funding relativities - have not changed markedly since 1992. Performance music schools have probably suffered more from universities' increasing reluctance to support activities by internal cross subsidies, particularly if those activities do not contribute to research rankings.

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    2. Tim Pitman

      Senior Research Fellow at Curtin University

      In reply to Sam Yates

      Hi Sam

      Supposedly, universities are subsidised at different rates to compensate for factors such as this. For example for Law, per year, the Commonwealth contributes approx $2,000 on the basis it is a relatively cheap 'chalk-'n-talk' set up, whereas Agriculture is subsidised by about $16,000. Many universities however argue the base amounts are still too little. Music is a good example because technology/new teaching practices are less able to create market efficiencies.

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    3. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to Tim Pitman

      Hi Tim

      I think the better approach is to consider the Commonwealth subsidy and maximum Hecs combined. Law and business get a lower Commonwealth subsidy, ostensibly because of the greater private benefits from these programs, but have the highest maximum Hecs. That funds the creative arts and languages at $17,549 compared to law and business $11,725 and agriculture at $29,438 (all 2013 rates).

      All disciplines can argue that they can't get productivity increases - Baumol's cost disease.

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    4. John Canning

      Professor at University of Sydney

      In reply to Sam Yates

      These are all valid points worthy of discussion – the longer term impact of our current system is not fully understood beyond some simple measurands and it amazes me how many can assume it can be treated simply. A demand driven system by its nature requires that you compete for the same funds through competition for students who ultimately are the source of demand that is used to gauge an institution. This leads to similar approaches and sidewards gazing, all of which distracts, if not replaces…

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    5. Tim Pitman

      Senior Research Fellow at Curtin University

      In reply to John Canning

      Hi John

      Thanks for this valuable contribution. When Brendan Nelson was education minister he proposed and trialled just such a value-add test (circa 2002/3 from memory). The idea was to test a representative sample of students for generic skills at commencement, then again at graduation. This, theoretically, would quantify the value of the educational experience. It was strongly resisted by most universities, overtly for for cost impost.

      Here I think the lessons of NAPLAN are salient. Many of those that support the validity of the test are nonetheless irritated that public focus is on the annual 'score' of each school, not on the extent to which they have improved results between Years 3 and 5, or 5 and 7, etc. I am sure any such value-add metric for higher education would suffer the same fate.

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    6. John Canning

      Professor at University of Sydney

      In reply to Tim Pitman

      You're right.
      What is interesting though is if we consider the following scenario, one which has not been taken up since I first raised it - if the private education sector continues to grow as it touts it is growing, will it have the leverage to enforce such examinations irrespective of impost?
      A clear opportunity to grow is, for example, in India where they need many, many millions of people that need to be trained to a tafe level over and above any university education. If that sector feeds…

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    7. Tim Pitman

      Senior Research Fellow at Curtin University

      In reply to John Canning

      I can only offer opinion here: I think the private education sector would have no interest nor desire in setting such generic exams. It would only occur if mandated by the Government, in which case the cost would be absorbed into the price of education by the private providers.

      With regards to the second issue - I am very interested in all recommendations arising from the review of the demand-driven system but particularly interested in what the reviewers say about expanding it to the sub-bachelor…

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    8. John Canning

      Professor at University of Sydney

      In reply to Tim Pitman

      Generally I agree with your comments.
      I was at a workshop organized by a private firm on education and the dismantling of universities and it was clear that many stake holders want post education evaluation at all levels. These included private companies offering courses to small business owners who were disgruntled with the quality of university graduates from so-called brand name institutions generally. It was quite interesting to see the only protagonist defending traditional Universities were…

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  4. John Canning

    Professor at University of Sydney

    One of the key problems with a demand driven system is that to a certain extent it is applying the same standards across the board. This may be ok for meeting regional employment demand for example and specific universities that meet those kind of industry needs which are straightforward to address since the largely local consumer is sufficiently savvy at this level to be aware of these. But the general consumer - students - themselves are hardly all likely to know what is in their best interests…

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    1. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to John Canning

      Physics enrolments started falling well before the demand driven system and ending the demand driven system will not restore physics enrolments to some ideal level - which would be determined how?

      The demand driven system increases universities' capacity to concentrate on the strengths - as Swinburne is doing by increasing its enrolments markedly in its core disciplines while cutting enrolments in others.

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    2. John Canning

      Professor at University of Sydney

      In reply to Gavin Moodie

      I made no comment on physics enrollments but the emphasis on what is demanded and the freedom to now avoid physics courses altogether. Your point about Swinburne supports what I was commenting on - that different institutions have different requirements and values. The demand driven system does not reflect this as far as I can see and what may be good for Swinburne would not necessarily be good for Melbourne University, for example. They are not the same, they feed different markets traditionally…

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    3. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to John Canning

      'For example, I am struck by the number of science students these days who have not done physics or significant maths at school because they don't want to and think its unnecessary . . .'. This has nothing to do with the demand driven system.

      It is precisely the demand driven system which has allowed Swinburne to change its profile as it is doing. Other universities are changing in different ways. This was possible but much harder when institutional profiles had to be negotiated with Commonwealth officials.

      Where is the evidence that universities are becoming more similar as a result of the demand driven system?

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    4. John Canning

      Professor at University of Sydney

      In reply to Gavin Moodie

      Courses are changed to allow greater flexibility and choice - demand driven and the changes are visibly more notable today than a few years ago. Therefore, whilst physics courses are on offer they can be avoided altogether - demand driven. This flexibility is a direct result of offering what is demanded so its a stretch to try and say that it is not happening - of course I doubt it was the intent to do so. That line clearly makes no reference to physics enrollments going up or down.
      As I said Swinburne…

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    5. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to John Canning

      'For example, I am struck by the number of science students these days who have not done physics . . .'. Perhaps this means that physics enrolments are flat?

      The choice of the University of Melbourne as a counter example is particularly inappropriate because arguably it more than any other has changed markedly recently. This antedated the demand driven system, but the university negotiated special treatment which allowed it to proceed with its substantial changes notwithstanding the introduction of the new system. UWA subsequently adopted a similar policy, again the demand driven system apparently being no impediment.

      As I wrote above, section 3 of Australian Catholic University's submission to the review of the demand driven system is interesting in giving several examples of universities taking advantage of the demand driven system to differentiate themselves.

      https://submissions.deewr.gov.au/forms/demand-driven-funding-system/pages/item?SubmissionID=DFS1400080

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    6. John Canning

      Professor at University of Sydney

      In reply to Gavin Moodie

      Completing the sentence: "and maths at school". So no comment on physics enrolments at university – whilst clearly no physics at school might lead to a drop in physics numbers at university, its not what I was referring to in any case.
      The examples you focus on are for smaller institutions. Melbourne and the others are G8 universities and yes they have had to adopt a different approach (they are in fact different universities as I clearly made reference to in my first comment). But in practice…

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