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There needs to be a frank discussion about how the government spends its education dollars. from

Large growth in student numbers is threatening sustainability of university system

A successful innovation nation needs three things from its universities: excellence in teaching and research, high levels of participation, and equity of access.

The current policy settings, while having achieved requisite levels of participation, have failed to substantially boost equity of access and have presented governments with enormous challenges in meeting the full costs of teaching and research.

It is imperative that the next government reforms our higher education policy framework to ensure the successful transition from a resources economy to a knowledge economy. This can be done in a number of ways.

1) Prioritise research funding

The funding provided for government prioritised research needs to better reflect its actual cost.

At present, universities are forced to cross-subsidise essential research by diverting funding from teaching. This encourages the mass teaching of some subjects, eroding quality, and creates an over-reliance on income from international student fees.

A better-funded system would lift the standard of Australia’s teaching, boost the quality of its research facilities, and support the commercialisation of existing research. These are critical factors in retaining and nurturing the talent that we need to spearhead our innovation drive.

2) Discuss how funding should be distributed

There needs to be a frank discussion about how the government spends its education dollars.

This means being forthright about the long-term sustainability of the demand-driven system, which was introduced in 2009 and allows universities to recruit as many students as they wish.

This is not to say that the demand-driven system has been a failure. In fact, it has been a great success when viewed as a tool to increase participation. The national target of 40% of 25-34 year olds receiving an undergraduate degree has been almost met.

However, the inability of successive governments to increase funding per student place means that the real value of funding has changed little in 20 years. For research students, the real value of funding per place has actually declined by around 30% over the last decade.

The large growth in student numbers as a result of demand-driven funding is hence threatening the sustainability of the whole system by restricting the government’s capacity to increase levels of public funding per student and for research.

Acknowledging this is important, because while the demand-driven system has succeeded in boosting participation, it has been much less effective in its other primary aim of increasing the percentage of low SES students attending universities.

The fact that the demand-driven system has already achieved one of its goals (participation), and has struggled on its second (increasing the percentage of low SES students) means that it is reasonable to question its continuation in its current form.

At current rates, it would take a significant increase in the overall size of the system to reach the 20% low SES target that was set in 2009.

This is not to advocate a return to the old system of government determined allocation of places in all disciplines. Rather, it is to open up a conversation about moderating the demand driven system to maintain its benefits while containing its cost.

3) Reduce financial barriers to higher education

We need create a new policy framework to improve equity outcomes. Our world-leading HECS student loan system ensures that students face no upfront fee cost barriers to entry. But they do face the prohibitive cost of meeting basic living expenses while studying. This is particularly true for students from regional and remote backgrounds.

We need to do more to ensure that there are no financial barriers to higher education for capable students by creating much better targeted income support packages. As a start, funding for the Higher Education Participation and Partnership program and for Aboriginal and Torres Strait Islander students must be maintained.

Part of the reason I lent my support to former education minister Christopher Pyne’s 2014 deregulation package was that it would have delivered the University of Sydney extra funding to provide unprecedented financial support to up a third of undergraduate students. Under our planned model, our most disadvantaged students would have been significantly better off then they are now.

That both sides of politics seem to have finally recognised the current policy settings no longer work is a great relief.

With predictions that five million lower skilled jobs will be lost over the next decade due to advances in technology, higher education will be critical in ensuring that our future workforce has the requisite skills to compete in a global economy.

Universities stand ready to assist in developing policies that safeguard the sector’s position among the world’s best, while remaining fair and equitable.

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