Release type: Speech


A Higher Education Revolution: Creating a Productive, Prosperous, Modern Australia

Australian Financial Review Higher Education Conference, Amora Hotel Jamison

Thank you Michael Gill for that introduction and to the conference organisers for the invitation to speak today.

I would also like to acknowledge the Cadigal band of the Eora people, the traditional custodians of this land.

Time for a system re-think

Just a few weeks into the new academic year is an opportune time for us to take stock of our higher education system, to start creating a new understanding about its importance to Australia's future, and to start building a consensus about how to improve it further.

Over the course of the last decade, the issue of human capital has risen dramatically in public policy importance globally.

Policy makers now accept that investing wisely in knowledge, skills and innovation is one of the best means available to ensure long-term prosperity, leading to both overall economic growth and to better education and work opportunities.

Around the world, governments have responded by increasing their policy focus in all areas of education, particularly higher education.

Everywhere it seems, except here.

In Australia since the mid-1990s our higher education system has been subjected to a seemingly random blend of neglect with occasional bursts of ideologically-driven interference.

Public funding has been cut.

Too many facilities at our universities are in decline - with a huge backlog in deferred maintenance.

Financing has become chaotic, compromised and unsustainable, based on an ever higher fees burden and a dangerous over-reliance on cross subsidisation from overseas student revenues.

A bewildering array of student financing arrangements has been put in place; each change adding another layer on top of past mistakes; none advancing the important goal of educational equity.

The academic workforce has been allowed to age.

And the quality of campus life has been undermined.

We've even seen the sad spectacle of higher education policy being driven by a sometimes highly unsubtle anti-intellectualism, with the central idea of higher education - the pursuit of knowledge as a crucial public good - dismissed as the wasteful activity of a selfish elite.

Despite the mish-mash approach of the Howard Government which ranged from neglect at one moment to ideologically driven interference at the next, most of our universities struggled through remarkably well. It is a great testament to the quality and commitment of our university leaders and the academic community.

Thanks to their commitment:

  • the numbers of those in higher education remains high
  • graduate employment outcomes are strong
  • graduate and employer satisfaction levels are generally good
  • provision of higher education to international students has grown to become one of our leading export sectors
  • we have notable areas of world-class research.

Labor's achievement in the 1980s and 1990s was to shift our higher education system to a mass system, building on record levels of secondary school attainment. Other nations adopted our approach.

But under John Howard, government slept at the wheel for more than a decade.

The Rudd Labor Government now needs to take up the next reform challenge - that is to inject diversity, choice and the highest quality into our mass higher education system.

Unless we resource and respect higher education institutions, we simply won't maintain our standard of living.

The inescapable conclusion is that Australia needs a new direction in national higher education policy.

One that aims to exploit fully our human capital potential in order to spread opportunity, raise economic productivity and transform the economic gains of the resources boom into sustainable prosperity for all Australians in the future.

Cold hard reality dictates that our goal must be the creation of a globally competitive higher education system for a modern Australia.

The Education Revolution policies Labor took to the Federal election and which we are now implementing, have begun to address the neglect of the last 11 years - by targeting resources to areas of skill shortage, by restoring equity and by enabling university leaders get on with the business of running their institutions without interference from politicians and public servants.

But the reform process will need to go further.

Taking it further will require no less than a system-wide rethink.

To facilitate that, I am announcing today a major review of Australian higher education, which will help us shape the next steps in the Education Revolution for our universities.

And I am announcing a new long-term goal for our post-secondary education system: guaranteed access to higher education or skills training for every young Australian with the talent and willingness to give it a go.

A fresh approach

The job of improving our higher education system is an exciting opportunity for me personally.

Like many of my colleagues in the Government, I'm one of those whose horizons and opportunities in life were expanded enormously by access to quality public schools and affordable universities - first in Adelaide then Melbourne.

This is something important that people should note about the new Government - including the Prime Minister: education made us.

And, as a result, we care about it. Deeply.

Not just about its obvious contribution to the economy, but its intrinsic values - the capacity education builds in all of us for critical thinking and reflection and the capability to better understand our place in the world.

It's why the first major commitment Kevin Rudd made when elected Opposition Leader was to start an Education Revolution.

In my experience, this understanding of the importance of education - including higher education - to society is widely shared by the Australian people.

I believe Australians are proud of our high international academic reputation. They understand that an Australian qualification has the potential to open doors for themselves and their children in places like London, New York and Beijing.

They reward intelligence and are proud of their intellectual high achievers.

And they know that the supposed dichotomy between academic and technical education is ultimately a false one.

Australians know that high quality advanced technical skills, high quality research and the best analytical thinking must go together to improve the way our businesses operate. And that together this skill and knowledge builds prosperity, more jobs and wealthier households.

The Rudd Government agrees.

Like them, we don't see our universities as places for an elite, but as places where every Australian can aspire to excellence in whatever field they choose.

We see them as the engine rooms of innovation and economic and social progress.

As places to be respected and nurtured - in return for their continuing cooperation and hard work.

I believe that together the Rudd Government and the higher education community can be like a breath of fresh air blowing through our lecture theatres, laboratories, tutorial rooms and technical workshops.

The case for higher education investment

The Rudd Government's rationale for improving the performance of our higher education system is that higher education leads to higher productivity which leads to higher economic growth.

This case is now well accepted by the world's leading economists and economic bodies.

Human capital economists like the University of Chicago's James Heckman (who won the Nobel Prize for Economics in 2000) have been telling us for some two decades that public spending on education and skills leads to high rates of return on investment for countries.

OECD analysis of human capital suggests significant positive correlations between rising levels of educational attainment on the one hand, and both economic growth and improved physical and mental wellbeing on the other. The organisation has estimated that one year of average additional educational attainment for a population adds between 3 to 6 percent to long term GDP growth.

Our competitor nations are aware of this thinking and have been acting on it. Australia, by contrast, has not. Consider this analysis.

Between 1995 and 2004 public funding of tertiary education increased by an average of 49 percent across the OECD but declined by 4 percent in Australia.

This makes Australia the only OECD country where the total level of public funding of tertiary education decreased during that time.

While private investment in Australia went up by 98 percent, this actually compares poorly with the average OECD increase of 176 percent. Most nations managed to increase both public and private investment substantially. Rather than leverage more private investment through a partnership for growth, Australia shifted responsibility from the public sector to the private. Mostly this has meant a shift to individual students and their families who have paid more through higher tuition fees.

Between 1995 and 2004 total funding per tertiary student increased by an average of 9 percent across the OECD but increased here by only 1 percent.

Australia is now starting to fall behind our competitors in graduations in critical areas. We are now below the OECD average for the proportion of graduates in science and agriculture, and way below them in engineering, manufacturing and construction - 7.2 percent compared with 12.2 percent. In Korea the figure is 27.1 percent - four times Australia's density.

Research is also being badly affected. In the last ten years, research output has grown rapidly in countries like Singapore, Korea, Taiwan and mainland China - which is now the second biggest investor in research and development in the world. But it has only limped along here in Australia.

If you want to know why investing in research is important, ask the University of Queensland's Professor Ian Frazer who discovered the vaccine for a cancer that kills 250,000 women every year.

Over the last decade, Australian higher education has barely stood still in terms of numbers, quality and output, while our competitors have surged ahead.

The picture is clear: we are under-investing in our human capital, and in the long run this will stall our global competitiveness.

This policy failure has grave potential consequences for every single Australian.

We've been led to believe in recent years that what happens to our universities doesn't matter to ordinary Australians. This is a dangerous fallacy.

Every Australian is now feeling the consequences of the Howard Government neglect of higher education in things like:

  • A shortage of Australian-trained doctors and nurses;
  • A shortage of early childhood educators and school teachers, especially in the crucial areas like maths and science; and,
  • A shortage of qualified engineers and logistical workers for our booming resources and construction sectors.

Skills shortages are driving up the cost of doing business so we all end up paying through higher inflation and higher interest rates.

So, if you want to know why investing in higher education is important, simply look at the waiting lists in your hospital or GP surgery, the lack of subject choice in your child's school, the rising cost of items in the shops and at your monthly bank balance.

By boosting national productivity, increasing Australia's investment in higher education will ultimately allow us to sustain higher economic growth at lower rates of inflation and interest rates.

The new President of the Business Council of Australia, Greg Gailey, got it right recently when he said:

"More than ever, governments need to focus on fiscal policies and broader reform agendas in areas such as infrastructure, education, skills and workforce participation that collectively enhance the nation's capacity to grow."

Australia simply can't afford a short-sighted, ideologically-driven and backward-looking approach to higher education policy any longer.

The moment is now for us to start seriously investing in human capital at all levels, including higher education.

Re-setting the balance - the Higher Education Revolution

Our first task must be to re-set the balance in our higher education system caused by the last decade of Federal government neglect and hostility.

While many of the tasks must be immediate and specific to the higher education sector, we must remember that narrowness and short-termism won't solve our problems.

This is why we have to start by recognising that ultimately the quality and number of the graduates we produce depends on the capacities of the high school graduates who enrol. This is a process that starts early - right at the beginning of education.

That's why we will ensure that every child in the year before formal schooling has access to fifteen hours a week and 40 weeks a year of high quality preschool education delivered by a qualified early childhood teacher.

It's why we will ensure that every upper secondary student has access to a computer. That Australian schools are served with fibre-to-the-premises connections that will deliver broadband speeds of up to 100 megabits per second.

We will also ensure that nine out of 10 children complete year 12 or the equivalent vocational training by 2020.

We recognise that not only must education be improved at the early years, it must be part of a broad and properly articulated national system that connects with and enhances vocational education. To help with this, we will deliver more than 450,000 new VET places over the next four years to address the skills gap.

These issues cut across the responsibilities of the Commonwealth and the States and addressing them requires genuine Commonwealth-State cooperation.

To this end, the Council of Australian Governments agreed in December 2007 to pursue an ambitious agenda of reform in the areas of education, skills and early childhood development. I am chairing the working group responsible for developing plans to deliver significant improvements in productivity outcomes for all Australians.

Of course getting our young people to university, TAFE and private institutions is only the start. Once there, we have to ensure they get the best higher education and training possible.

The Government has already begun the process of improvement by starting to implement our major higher education commitments.

To improve equity, full fee-paying undergraduate places will be phased out in public universities for domestic students from 2009. We will be consulting soon with all universities to work through implementation of this initiative, including a compensating increase in Commonwealth funded places.

To address the shortfall in critical disciplines, fees for new students studying maths and science will be reduced by approximately 50 per cent. We will pay 50 per cent of the HECS-HELP repayments of maths and science graduates for five years, where they choose to work in a priority maths or science related occupation.

To address shortages in key occupations, we are allocating 1500 extra nursing places as part of a range of measures to attract 9,250 extra nurses into the workforce and 1,500 extra early childhood education places. The number of undergraduate Commonwealth Scholarships will double from 44,000 to 88,000 to assist students from disadvantaged backgrounds.

To increase the number of candidates for higher degrees, we are doubling the number of Australian Postgraduate Awards by 2012.

And to restore the quality of students' experiences on campus, the Minister for Youth, Kate Ellis, has been consulting with universities and all stakeholders and working to re-build university services.

A Review of Higher Education

These changes are significant and go to the heart of the immediate- to medium-term needs of our higher education system.

But long-term improvements of the scale needed to make a major contribution to economic productivity and prosperity will require a new strategy based on a thorough reassessment of the system as a whole.

Unfortunately, there has been no serious, independent, evidence-driven look at the higher education system for many years. Sure, the previous Government had its own approach to reviews, such as last year's review of the system's funding clusters or the earlier Brendan Nelson driven Crossroads review. And then there was the ill-fated West review (which some of you will remember) the proposals of which were killed off by the former Prime Minister before it could even properly report.

For too long there has been no serious consideration of the future of our higher education sector. As a result, government policy has been ad-hoc and inadequate.

To address this, the Rudd Government will commission a major Review of Australian Higher Education.

It will report on the future direction of the sector, its capacity to meet the needs of the Australian community and economy, and the options available for ongoing reform.

In particular the Review panel will examine and advise on how to progress a number of key objectives for higher education.

The first is the creation of a diverse set of high performing, globally-focused institutions, each with its own clear, distinctive mission.

The second is improving the sector's contribution to increased economic productivity and labour market participation. In making recommendations on this point, the Review will take into account current economic, workforce and demographic trends.

The third is the improvement of funding arrangements for the sector, taking into account public and private contributions and the development of funding compacts between the Australian Government and institutions.

The fourth will be widening access to higher education and improving student support programs so as to promote social inclusion and individual opportunity.

The fifth is to ensure the highest possible standards - because ultimately the future of the system rests on the quality and reputation of its teaching and research.

Next is the creation of a broad tertiary education system with proper articulation between universities and vocational education and training.

It will consult with State and Territory tertiary education authorities and invite submissions from the sector and community.

It will collaborate with and take account of the work of the Review of the National Innovation System and the Government's new skills advisory body Skills Australia.

The Review will be a document of great importance that will inform the preparation of the Government's policy agenda for higher education for the decade ahead.

We see it as relevant not just to the higher education sector, but as a major contribution to Australia's economic and social wellbeing in the coming decade.

I'm delighted, given the importance of the task, to have someone of the calibre of Denise Bradley to chair it for us.

Many of you will know Denise well. Her leadership at the University of South Australia, where she was Vice-Chancellor for over a decade, and her many years of involvement in national education policy, where she is still heavily involved, will ensure that she brings both detailed expertise and policy rigour to the Review.

Other members of the Review Expert Panel will be:

  • Peter Noonan, who is an expert consultant in vocational and higher education with a deep experience in vocational education leadership in the Commonwealth, Queensland and Victorian Governments;
  • Helen Nugent, who has an extensive background in business, higher education, the arts and advice to governments, and who chaired the 1999 Ministerial Inquiry into the Major Performing Arts; and
  • Bill Scales, who is currently Chancellor of Swinburne University of Technology and Chairman of the Port of Melbourne Corporation and who will bring to the Review his years of experience in the public and private sectors.

The Review will provide a report on priority action by the end of October and a final report by the end of this year.

It is my intention that the recommendations of the Review will build on the collaborative new approach to Government-university relationships embodied in our proposed mission-based compacts. These compacts will provide public universities with greater operating autonomy within a total funding envelope agreed on a three-yearly basis. We want to encourage universities to pursue distinctive missions within a public reporting framework of mission-based goals agreed outcomes and performance standards.

This year the Government will be consulting with universities on the precise shape of the compacts. I expect this consultation process to kick off soon. We will then move to negotiate compacts with each university in 2009 for implementation in 2010.

To get things started, we are legislating in the current session of Parliament to remove the Higher Education Workplace Relations Requirements and the National Governance Protocols as conditions of funding.

Conclusion: new approach based on cooperation

So we have a huge and important task ahead - to put higher education at the heart of our efforts to create a more productive and prosperous economy and a more equitable society.

In my view, this will best be achieved by enhancing the qualities that have made our universities such treasured and respected places of learning for so long.

Not just generic qualities - like the disinterested pursuit of knowledge - but the particular qualities and strengths that each institution possesses, whether it is delivering large-scale undergraduate degree programs, graduate programs, innovative research, or meeting the needs of specific regional communities.

Managing diversity like this while meeting national goals cannot be done successfully through either a command and control or laissez-faire approach.

It will take a new era of cooperation. And while we're unlikely to see eye-to-eye on every particular issue, I believe significant progress will occur.

For the first time in many years, Australian universities will have a Federal government that trusts and respects them. A government, which understands that the formation of knowledge and skills through teaching and research is the indispensable - absolutely indispensable - precondition for the creation of a stronger economy and a more confident and equitable society.

Our universities are great civic institutions with a grand public purpose that spans economic and non-economic spheres. Building and constantly re-building the capacity of our universities is therefore an essential task for us all.

Thank you.