Simon Birmingham: Thanks very much, Beth, for that introduction and the opportunity to be here at this wonderful gathering of policy discussion over a couple of days in not so sunny Melbourne and, Beth, thank you for introducing to the higher education debate, their new concept that we shall ask them here on in, which is what would Andrew Mackenzie do…[laughter]…which would be an interesting test as we try and validate the different policy descriptions in the future and consider their merits or otherwise. But in seriousness, it’s great to be here today and particularly to be here with a panel with the likes of Lyn, Bruce, Susan and Andrew, confident that by the end of today’s discussions, if not quite by the time I have to leave to catch a flight, but at least by the end of the day’s discussions, all the problems in the higher education sector can and will be resolved as they test each other’s ideas and make sure that we iron out all the problems.
The theme for this conference is, of course, an incredibly important theme, rebuilding the foundations for reform. It goes without saying that reform should be in the national interest, that is the whole reason why we would seek to undertake reform in any particular area. It must align with public policy objectives that have or for which public support can be built. Reform needs, if you like, its own social licence which in turn to achieve that social licence, requires a sound evidence base and political will to explain the pace of change.
The theme is, as everybody I’m sure that’s come into this room for this particular discussion would appreciate, most fitting in relation to higher education where we all acknowledge that recent attempts at reform have become stuck in the political process. As a still relatively new minister, my approach to rebuilding the foundations for reform is relatively simple; firstly my admission is to identify, based on evidence, the reasons why reform is necessary, what are the problems, what are the future challenges and what are the future opportunities facing higher education.
Secondly, to identify and rigorously analyse possible policy responses to these problems, challenges and opportunities and thirdly, and lastly of course, to attempt to then outline a coherent reform agenda that demonstrates how proposal reforms fix the problems, address the challenges and maximise our capacities as a nation to respond to the opportunities of the future. This brings me to the sub-topic which of course is the focus of this particular panel session on higher education. The question that has been put is why, when tertiary educations have become the nation’s largest export earners, do they still have trouble getting their finances on sound footing?
Now, to be true to my formula for success or reform, we need the first test the validity of this question. Is it our tertiary institutions that are having trouble with their finances or is it governments and students having trouble with the sustainability of current funding mechanisms? Successive governments, dating back to Menzies, have grappled with how to keep the system sustainable. In 1960s Menzies said, in relation to a report on higher education, the government is by no means sure that this state of things, more and more students requiring proportionately more and more outlay can proceed indefinitely.
On the contrary, it is out view that money which would be required is very likely to be completely out of reach, therefore the Cabinet takes the view that beginning now and over the next 12 to 18 months, the most vital task for the Commission will be to address itself and find solutions to the problems of providing a necessary amount of tertiary education within financial limits which are very much more modest than under our present university system. That was 1960, today is 2015 and of course we still debate many of the same questions.
Just last week I released a report that sought to analyse the type of problems that we’ve been identifying and reforms that we’ve been proposing to higher education dating back to Dawkins era and when some of Bruce’s reforms were of course proposed, through to the Kemp-Norton report most recently released and identified that so many of the challenges and problems are constant throughout the cycle, or at least in many cases, the perceptions of them.
In contrast to government budgets though, the majority of Australian universities, at least on the surface, appear to be in a sound financial position. Revenue for the university sector has risen by 99 per cent since 2005, reaching $27.8 billion in 2014. In 2014, the sector recorded a surplus of $1.8 billion. So are the challenges and opportunities facing our institutions less about sound finances as today’s questioning put and more about how they ensure they remain institutions of choice for both international and domestic students which in turn relates to how they ensure high quality employment outcomes for their students driven by the value that a rapidly changing labour market sees in the qualifications and skills those students acquire at these universities?
And secondly, how it is that they lift themselves as institutions to be institutions again of choice but of choice with research partners across both the government and non-government sectors, ensuring they play a role in Australia’s being the innovative, agile and adaptive country that we are aspiring as a government to ensure our nation is.
Many claims have been made through debates on higher education that Australia has low public investment, compared with the OECD average. However, the latest OECD data shows that Australia’s total expenditure from both public and private sources on university education was 1.43 per cent of GDP, above the OECD average of 1.39 per cent. On this basis, Australia ranks 7th highest out of 21 OECD countries with data available. Of total public spending on all services, including health, defence, and social services, Australian governments spend 3.5 per cent on tertiary education – again, above the OECD average of 3.15 per cent and 13th highest out of 31 OECD countries with data available.
The advent of Bruce’s Income Contingent Loan scheme improved access for a much wider group of Australians; made it fairer by removing the need for other funder fees; guaranteed equitable access and it’s provided, of course, a very strong funding stream to universities, with a relative degree of sustainability in the taxpayer. But by removing the cap on undergraduate places, the pressure placed on the sources of funding has intensified greatly. From 2004 to 2014, government outlays for teaching and learning have increased from $5.1 billion to $12.7 billion – an average growth rate, just in teaching and learning, around 10 per cent per annum.
Removing the cap has also changed the financial incentives for universities, which has been to admit more and more students to get more taxpayer funding. Increasing skills and graduate numbers is, of course, a good thing in overall terms. But we must guard against it undermining quality or the outcomes and private benefit that such qualifications are intended to deliver to graduates. We must also guard against incentives preventing universities from focusing on internal innovation, diversifying their offerings, playing to their strengths and achieving excellence in certain fields – all areas that Beth highlighted in her introduction.
The current caps on student contribution amounts with Commonwealth support of students have resulted in universities generally charging near or at the maximum allowed fee, which has led to the effective establishment of a common resourcing level for each discipline across each institution. Giving universities some flexibility in how they set at least some of their fees would allow institutions to attract the resources they consider necessary to deliver high quality education offerings that differentiate across institutions in a way that is more meaningful than just brand or status alone, and allowing universities to focus on unique missions.
Some enhanced diversity in the sector would also give students more choice, allowing them to choose the course and the provider which is most suited to their future career ambitions. Specialising in areas of excellence and differentiating themselves from the pack can only help to increase the global standing of our universities, which in turn can only help to underpin the future viability of our $18 billion international education sector.
We know that some of the highest ranked institutions in the world are specialist universities, such as the California Institute of Technology – number one in The Times Higher Education World Rankings for 2015; the Massachusetts Institute of Technology or the London School of Economics and Political Science being other good examples.
I am open to the means as to how we create the right incentives for such specialisation and individualisation by our institutions. As everybody knows, the Government has put proposals for reform on the table previously, but as the new minister, I encourage the experts and the stakeholders across the sector to bring forward alternatives. People like Bruce and Andrew have proposed variations and put forward suggestions already, and let that debate rage. Because it is important that we hear the different options; but it is also important we achieve the reform that can be done.
And so it’s with that, and to ensure we have maximum time now for questions, that I return to those opening themes that I outlined: the importance as a Government that I will place on making sure that we carefully outline over the coming weeks and months what the problems are, what the challenges universities face, and the opportunities they have for the future. Do we make sure we have robust evidence that backs up those problems and leads us to reforms that are solutions to real problems, and reforms that hopefully with that can carry the support of not just those in the sector, as we’ve enjoyed previously, but also of course those across society and in the political class too.
I’m sure there are many other issues that we would like to touch on beyond just the funding of learning and teaching and more than happy to have, of course, those questions and hopefully to have some time for interaction with the panel as well. Thank you very much.