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Big-spending ‘recovery budget’ leaves universities out in the cold

The 2021 federal budget has largely ignored the plight of Australian universities. The forward estimates even point to an overall decline, once adjusted for inflation, in Commonwealth direct funding for higher education through to 2023-34.

On top of this, the budget indicates Australia’s borders will remain largely closed until at least mid-2022. That means our universities face a further period of stringency as revenue from international students continues to fall.

Read more: The 2021-22 budget has added salt to universities' COVID wounds

Federal Treasurer Josh Frydenberg has described the 2021-22 budget as an expansionary “recovery budget”. And the budget embraces most sectors in need of support during this recovery from the COVID-19 pandemic, except for Australian universities. It appears the Australian government perceives higher education to have a limited role to play in innovation, skills development, job creation, research-based knowledge generation and national productivity – all crucial elements in Australia’s recovery.

The budget offers no vision of the long-term sustainable funding plan our universities need to be internationally competitive. The government is relying on last year’s Job-ready Graduates Package to secure a 30,000 increase in domestic student places. But it has done little about the much greater loss of international students and the revenue they provided.

For greater financial certainty, universities must look to state-based plans for purpose-built quarantine facilities to enable at least some international students to return in 2021-22. The budget contained none of the funding requested for such facilities.

Read more: As hopes of international students' return fade, closed borders could cost $20bn a year in 2022 – half the sector's value

From bad to worse in 2021-22

Australian universities are still grappling with the greatest financial challenges since the Great Depression. With national borders closed, universities are struggling to attract new cohorts of international students to replace those who complete their courses. These students have a strong preference for studying on campus, so Australia is increasingly at a disadvantage compared with the UK, US and Canada.

Under Australia’s higher education business model, international student fees have been vital in cross-subsidising university research. University discretionary funds accounted for half of their annual pre-pandemic spending on research and research training.

Read more: Budget's $1bn research boost is a welcome first step. Billions more, plus policy reforms, will be needed

Without continuing strong research performance, a key driver of innovation essential to Australia’s recovery will decline. The global standing of Australian universities will also suffer, making it even harder to attract international students.

The injection of an extra $1 billion of emergency research funding in 2020-21 was most welcome to shore up the international competitiveness of our universities. The crisis has not passed, but there is no additional research support for 2021-22.

In addition, Australian universities are in the midst of a “digital revolution” as they transform from a predominantly face-to-face mode of teaching and learning to one that is either wholly or partially online. This transition will be expensive. At the same time, total funding for most student places in STEM subjects is being reduced because of the Job-ready Graduates policy.

Read more: The government is making ‘job-ready’ degrees cheaper for students – but cutting funding to the same courses

Expect more job losses

The impact of the pandemic on Australian universities has been substantial. In February 2021, Universities Australia announced more than 17,000 jobs had been lost. The peak university body also forecast a financial shortfall of several billion dollars for 2021-22.

woman making a point
Universities Australia Chief Executive Catriona Jackson has predicted university revenue losses will be even bigger in 2021 than in 2020. Twitter

The job loss estimates might be conservative, according to our calculations. Victoria, with 36% of the university workforce (on a head count basis), reported the loss of 7,500 jobs in 2020. Pro-rated to all Australian universities, this figure suggests job losses exceeded 21,000 in 2020, with more expected in 2021.

Fixed-term and casual employees have borne the brunt of job cuts in response to the falls in revenue.

The industry-focused emphasis on innovation, commercialisation and tax breaks for earnings from Australian patents in the medical and biotechnology fields are in the national interest. This includes $42.4 million of co-funding with industry of STEM scholarships for women. However, these initiatives have limited spillover benefits for universities.

Read more: Our unis are far behind the world's best at commercialising research. Here are 3 ways to catch up

So many missed opportunities

The federal government’s failure to acknowledge the major financial challenges universities will face for several more years represents a serious flaw in the budget recovery plan. It has missed several opportunities to underpin initiatives essential for wealth generation and universities’ international competitiveness and financial sustainability. The problems include:

  • no fine-tuning of anomalies identified in the Job-ready Graduates legislation, especially the reduced funding for science and engineering subjects

Read more: 3 flaws in Job-Ready Graduates package will add to the turmoil in Australian higher education

  • the shortfall in government research funding to compensate for the loss of discretionary funding available to universities from international student revenue

  • the lack of financial assistance to help retain highly skilled academic and professional staff – which continues the approach we saw with last year’s divide between private sector eligibility and public sector ineligibility for JobKeeper support

  • no assistance with recruiting international students, let alone funding to expand limited quarantine capacity and enable their return to Australia. This contrasts with the position of private English language course providers that will receive extra funding.

Financially viable universities, at the leading edge of knowledge generation and skills development, provide a vital service to the Australian community. They contribute to our economic, cultural and social aspirations. An opportunity has been lost with the 2021-22 budget because it has neither acknowledged nor acted upon the fact that universities are a cornerstone of prosperity in developed countries.

A long-term strategy and funding plan for universities are urgently required. The current crisis should prompt a strategic government response.

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