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Australia’s public commentary will tell you our spending on tertiary education is much lower than other OECD countries’. from

Australia’s tertiary education spending grew while commentators cried otherwise: we explain in 6 charts

Each year universities check the latest OECD Education at a Glance report to see how Australian tertiary spending compares with peer countries.

The good news is that every report since 2012 has shown our tertiary sector revenue growth outpacing the OECD average.

But this trend doesn’t feature in Australian commentary. Instead, the folklore goes, our public spending on tertiary institutions (university degrees and VET diplomas) ranks near the bottom of the OECD as a share of GDP; and this makes our universities among the lowest-funded in the OECD.

Read more: Demand-driven funding for universities is frozen. What does this mean and should the policy be restored?

Some even say our total (public and private) spending on tertiary institutions has been flat since 2000, while rising elsewhere in the OECD.

So, what is the actual story?

University revenue has risen (in domestic data)

Let’s take that last claim first, on total tertiary spending. It’s from a Universities Australia budget submission for 2017-2018. As a view on university spending it’s clearly at odds with domestic data.

From 2001-2016, total revenue for our universities doubled – from A$15.5 to A$30.8 billion. By 2016, Commonwealth grants for research and teaching reached A$11 billion, up from A$6.2 in 2001.

Private spending grew even more. In 2016 international students put in A$6.5 billion or 20%. Domestic students put in A$6.7, but about A$1 billion in HELP loans won’t be repaid. So, net Commonwealth funding was about A$12 billion or 40% of A$30.8. All told, students and the government each put in about 40% in 2016.

… and in OECD data, total tertiary spending also went up

In 2000 Australia’s total (public and private) spending rate for tertiary institutions (degrees and diplomas) was 1.4% of GDP (the OECD average was 1.3).

From 2009-2012, Australia’s rate mirrored the OECD’s 1.6%. Then between 2013 and 2016 it rose to 1.9% as the OECD’s rate slid to 1.5%.

In total public spending on tertiary education, our rate was well below the OECD average between 2005 and 2012. But by 2016 it was 1.4%, higher than the OECD average of 1.2%.

Australian public spend is lower after transfer of HELP loans

For years we’ve heard our public spending is second-lowest in the OECD. While never actually true, the claim arose in 2014, 2015, 2016, 2017 and 2018.

A problem here is GDP growth. But first, let’s look at HELP loans.

The OECD treats HELP loans as public in initial government spending but as private in final government spending (after government transfers to individuals). In last year’s report the OECD put our initial public spending on degrees and diplomas at 1.3% of GDP, compared with an OECD average of 1.1%.

Chart 3 shows the annual gap in final public rates that underpins Australian folklore. It’s why Universities Australia still says we rank near the bottom of the ladder for public investment.

Read more: How does being second-last in the OECD for public funding affect our unis?

Australia’s final public rate was lower than the OECD average in 2016 – 0.75% of GDP compared to 0.93%. But here all HELP loans become private – whether repaid or not.

Few dare dwell on how highly we rank for total spending. Except to say it seems unethical for students to foot so much of the bill, with more than 60% of income taken from private sources.

But recall chart 1 – students put in 40%. And as chart 3 shows, there’s no ideal OECD norm such as 60% public.

GDP growth masks real rises (and falls) in spending

GDP based comparisons can be misleading. Chart 4 shows how spending as a share of GDP rose in every sample country over 2008-09. This helped lift the OECD average rate from 1.5% to 1.6%.

Finland’s rate surged from 1.6% to 1.9%. Sweden’s also surged from 1.5% to 1.8%. Australia’s rose less, from 1.5% to 1.6%. The others saw modest rises also.

By 2013, all still had higher rates than in 2008. So chart 4 suggests that in all cases, spending rose.

But chart 5 shows that in Portugal, Spain and Italy real spending fell between 2008 and 2013. In fact Australia’s real spending grew the most, by 28%. But since its GDP also grew the most, chart 4 suggests more modest spending growth.

As chart 5 shows, Finland’s 2008-09 “surge” was mainly a 9% slide in GDP. Sweden’s story was similar, with a 5% GDP slide. In Spain, Portugal and Italy, falls in real spending look like rises in chart 4. But only because GDP shrank even more sharply than spending over 2008-2013.

GDP based factoids underpin Australian folklore. Claims such as Portugal invests far more in public spending are common. But over 2010-2016 Australia’s total tertiary spending grew by 36% (see chart 6), while in Portugal it fell by 19%.

We do need better funding, but based on reliable data

The real spending trends highlighted in the 2008 Bradley Review of Australian higher education, back when we did lag the OECD average in spending growth, have been reversed:

  • in the 2013 OECD report Australia’s spending rose by 26% over 2005-2010, as the OECD average rose by 20%.
  • in the 2016 report Australia’s spending rose by 28% over 2008-2013, as the OECD average rose by 17%
  • in the 2019 report Australia’s spending rose by 36% over 2010-2016. In a dozen other countries, spending fell (such as Portugal, by 19%).

Incredibly, these trends have been ignored. Since 2008 we’ve been peering through the prism of GDP based data, to declare the result a global “ranking” – as if the financial crisis never happened. From a sector that sanctifies evidence and expertise, it’s irresponsible.

But there’s still a case for better tertiary funding in Australia.

That case must be made with more current and relevant domestic data. This should include properly tracked trends in real tertiary spending, projected rises in the number of school leavers, and labour market demand for skills and knowledge.

Read more: Enrolments flatlining: Australian unis' financial strife in three charts

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