It’s a pleasure to join you for this higher education symposium. It enables me to acknowledge the important role that private education and training plays in equipping Australian students with the skills and knowledge they need for the jobs of the 21st century, and to acknowledge the role that ACPET plays in public debate about a range of key issues.
It will be no surprise to you that I am going to talk about last week’s Budget and the substantial higher education reforms it introduced.
These reforms will create new opportunities for all non-university higher education institutions, many of which are ACPET members, as well as for our universities and – above all - for our students.
They are the biggest reforms of our higher education system in 30 years. It is a fair and balanced package that spreads opportunity for students and ensures Australia will not be left behind as global competition intensifies.
Australia has a strong higher education and research system.
But it needs to be better. We can’t allow ourselves to be left behind by our global competitors. We must work to keep ahead of the competition.
The Budget reforms are directed at building a higher education system that can be the best higher education system in world. Private as well as public higher education institutions have important roles to play in this.
At Monash University a few weeks ago I spoke about what a world’s best higher education system might look like.
Such a system would provide opportunities for students from all backgrounds to choose the course and type of higher education provider that is right for them. Students would enjoy a wide diversity of good choices.
Higher education would be affordable, with no upfront costs for students. The costs would be shared between students and taxpayers.
The best higher education system would recognise that students from disadvantaged backgrounds need additional support to enrol in and complete higher education.
Some of the universities in this system would be among the very best in the world providing world class teaching and research. All higher education institutions would pursue their goals as well as they could.
Students and their families would be provided with good information to make informed decisions about their study choices.
The Government’s role would be to help students and to promote research. It would uphold the quality of the system without unnecessary red tape and make sure the taxpayers’ contribution is well spent.
The higher education reforms spread opportunity by offering more choices to students. By giving higher education institutions the capacity to grow and prosper, they ensure that Australia will not be left behind.
We are uncapping support for students studying for higher education diplomas, advanced diplomas and associate degrees.
We are extending Commonwealth funding to all Australian higher education students enrolled in registered non-university higher education institutions studying accredited undergraduate courses. This, I know, will be of particular interest to many members of ACPET.
By 2018 there will be 80,000 more students supported every year in higher education as a result.
The reforms will encourage higher education institutions to compete for students. When higher education institutions compete for students, students win. Students win through an improved range of choices of courses that meet their needs, and that offer them qualifications that will get them a job. Students win through increased focus on the quality of teaching and of the all-round student learning experience. Students win through education institutions competing for them on price.
To free our higher education institutions fully to compete for students, and to offer the best range of choices at appropriate prices, it is necessary to enable them to set their own fee levels.
Deregulating the maximum student contribution will free universities and non-university institutions from their current restrictions and allow them to compete, including on price. This will give students more choice than ever before. It will enable universities and other institutions to set fees that will properly resource the quality of education they are offering and that they want to offer.
Students will continue to have access to the Higher Education Loan Programme. No one will need to pay a dollar upfront. Graduates will only begin repaying their HELP debt when they are earning more than $50,000. They will pay a fair interest rate with reasonable repayment thresholds as they repay their share of the cost of their higher education.
Our reform of the HELP scheme removes all HELP loan fees currently imposed on some students undertaking higher education and vocational education and training. These are the 25 per cent loan fee students must pay to receive a loan for undergraduate courses of study under FEE-HELP; and the 20 per cent loan fee that applies to students taking out a full fee loan under VET FEE-HELP.
The lifetime limits on these schemes are also being removed.
We are also creating more opportunities for students from low-socio economic backgrounds and regional areas through the new Commonwealth Scholarship scheme that I will return to a little later.
As well as providing further support for students in higher education, the Budget introduces a HECS-style Trade Support Loans programme for apprentices. This offers loans up to $20,000 paid in instalments over four years to cover the daily living and learning costs of undertaking an apprenticeship. As with the Higher Education Loan Programme, apprentices will only have to start making repayments when they are earning a decent income.
Expanding opportunities for students
The reform package is driven by the desire to offer our students the best range of options we can, including promoting both the highest quality and the fairest access we can in our higher education system.
We are doing this for our students.
In 2008, the final report of the Bradley Review recommended the introduction of the demand driven funding system. In that same recommendation (number 29) the Review stated “demand driven funding should initially be for public universities and extended to private providers once regulatory arrangements are in place.”
This recommendation applied to associate degrees and above, and diplomas and advanced diplomas accredited in the higher education system. But it was not implemented in full. Until now only enrolments in bachelor-level degrees at public universities have been demand driven.
The demand driven system is working well for public universities, and the regulatory arrangements are in place, so it is time to do what Denise Bradley recommended and expand the system for the benefit of students.
Towards the end of last year I asked the Hon David Kemp and Andrew Norton to review the demand driven system. I wanted to make sure it was working as intended and delivering opportunities for students without compromising the quality of their education.
After examining the evidence and considering over 80 submissions, the reviewers recommended the Government not only retain the system but also extend it to include both non university institutions and the full range of undergraduate higher education qualifications.
This recommendation was widely supported.
The Innovative Research Universities supported expanding the system, saying
The IRU urges the Government to adopt the recommendation to include pre-bachelor qualifications within the demand driven system. This will give universities and students the flexibility to choose between these useful foundation qualifications and immediate entry to bachelor study. It will also support IRU members to expand Diploma of language courses.
Professor Bradley, interviewed in The Australian following the release of the Kemp-Norton review in April, said that it “moves the demand-driven system forward to where it needs to go” and that “we had always assumed that Commonwealth supported places would spread further among non-university providers”.
As you know, the Government has accepted the Kemp-Norton recommendation and that of Bradley before them.
I am pleased to note that following the Budget, Claire Field, ACPET’s CEO, commended the Government “on its investment in tertiary education and creation of a level playing field for all tertiary students”.
The Government’s higher education reforms are a major milestone, and deliver equity and fairness for the growing number of higher education students choosing to undertake their degree or sub-degree program at a non-university institution.
The expansion of demand-driven Commonwealth funding to students studying diplomas, advanced diplomas and associate degrees recognises the value of these courses, both as opportunities in themselves, and as pathways to bachelor degrees.
The inclusion of these courses will benefit students by allowing them to prepare for bachelor level study or for work where there is growing demand.
The Kemp-Norton review showed that students who are less well prepared to enter university have a lower prospect of completing their studies than other students. It also showed that academic preparation is the key to success and that these students’ outcomes improve considerably if they take a pathway program first.
Less well prepared students will now be able to choose a course that will prepare them for continuing their studies. This will encourage them to take up study in the first place and give them a better chance of completing their studies.
By getting student better prepared through pathway courses we should see a reduction in university attrition rates. This means more students will get the benefit of completing their higher education qualification.
What it means for higher education institutions
Commonwealth-supported places will be made available to support Australian higher education students in the undergraduate programmes I have mentioned with all institutions on certain conditions. These precise conditions will be determined by Government following consultation that is underway, including through two working groups that my Department has formed.
I do not want to prejudge that consultation and advice, but it would be appropriate to mention some of the considerations.
The Tertiary Education Quality and Standards Agency was found by the Kemp-Norton review to be a guard against poor quality courses and institutions in an expanding higher education system.
To receive a Commonwealth supported place students must be enrolled at a registered higher education institution and, if that institution is not self-accrediting, in a course accredited by TEQSA.
TEQSA will continue to be required to focus on the registration of institutions and accreditation of courses as we open up the system and as the number of students supported by the Government and taxpayers continues to grow.
Through a focus on risk, proportionality and necessity, TEQSA will ensure the maintenance of higher education standards to protect students and the quality and reputation of Australian higher education.
The TEQSA Advisory Council has been established to provide strategic policy advice to TEQSA and to me on minimising regulatory intervention relating to Australian higher education, consistent with ensuring accountability for quality.
The greatest driver of quality will be competition for students between higher education institutions. To ensure competition does drive quality, we will provide clear information for students and families about the quality of courses and institution they are considering.
This will involve new student and employer surveys that build on a review of student surveys chaired by Professor Ian O’Connor, Vice-Chancellor of Griffith University. All institutions offering Commonwealth supported places will be required to participate in the surveys and the results will be presented in an accessible web-based format.
The surveys include the University Experience Survey, the Graduate Outcomes Survey and the development of a new Employer Satisfaction Survey. These will provide information about how successful previous graduates have been at securing jobs and what other students and employers think of courses and institutions.
All higher education institutions with enrolments of 500 or more Commonwealth supported places will be required to allocate $1 in every $5 of additional revenue they raise from student contributions to a new Commonwealth Scholarships scheme.
These will include needs based scholarships to help meet the costs of living along with elements such as mentoring, fee exemptions and other support critical to supporting a student’s study.
This will help many students from regional Australia and outer metropolitan areas, many Indigenous students, low SES students and others who are the first in their family to enter and complete higher education.
For institutions eligible for Commonwealth-supported places, it will be important to establish the rate of funding of those places. I have said elsewhere that there are important differences between universities and non-university higher education institutions that need to be addressed here.
As you know, universities are required to undertake research and non-university higher education institutions are not required to do so, though some of course do.
For this reason I think it would be appropriate for Commonwealth-supported places in non-university institutions to be funded at a lower rate than in universities.
There are other differences between universities and non-university higher education institutions that may be relevant, possibly including different community expectations and service obligations.
This question – the funding differential between universities and non-university higher education institutions - is one of the topics on which one of the working groups formed by my department, including with members from the non-university sector, will be providing feedback and advice.
Fee Deregulation and a sustainable HELP system
There has in recent times been growing support for deregulation of the higher education system because people understand that this is the only way to provide our students with the choices and quality education they need. It is the only way of ensuring that Australia is not left behind in intensifying international competition in higher education.
One advocate of fee deregulation is Dr Andrew Leigh, a former professor of economics at the Australian National University and now Labor’s Shadow Assistant Treasurer and Shadow Minister for Competition. In a co-authored book Imagining Australia, Dr Leigh proposed that
Australian universities be free to set student fees according to the market value of their degrees. A deregulated or market-based HECS will make the student contribution system fairer, because the fees students pay will more closely approximate the value they receive through future earnings.
In a recent article Professors Gareth Evans and Ian Young of the ANU also argued that fee deregulation will encourage diversity of choice for students and help Australian higher education compete internationally. They said
The bottom line is that if Australia is to develop universities which can truly compete internationally, that can provide an excellent educational experience for students and produce really outstanding graduates of the kind that are so vital to our nation’s future, we have to not only allow, but encourage, diversity by removing the constraints that prevent innovation.
It is not enough just to expand the system to more institutions and more courses. The demand driven system’s success in increasing undergraduate student numbers by more than 15 per cent between 2009 and 2012 has also had a considerable impact on the cost of higher education to the taxpayer. This is estimated to be an additional $7.6 billion over the five years from 2013-14.
We will never have the diversity of choices for students and the quality of courses that we need without fee deregulation.
To address this, the Government is removing the student contribution maximum amount, allowing universities and non-university institutions to set their own course fees.
As I said earlier – when institutions compete for students, students win. Higher education institutions will be more responsive to student needs as they position themselves in the higher education market.
The changes to the Commonwealth Grant Scheme and the removal of student contribution maximum amounts will not take effect until 1 January 2016.
No current student will be affected by the changes to the Commonwealth Grant Scheme until they cease their current studies or until after 2020, whichever is earlier.
Our income contingent student loan system – the Higher Education Loan Programme – is how we ensure that these changes are fair and equitable.
These loans ensure that students do not face up-front costs and do not repay until they are earning more than $50,000.
It is a fair system.
We are providing further opportunities for students by strengthening the Higher Education Loan Programme.
Commencing from 1 July 2016 the repayment threshold will be $50,638.
At this income level students will repay 2 per cent of their income towards their loans.
This new minimum threshold is much more generous than the recommendation of the recent Commission of Audit to use the minimum wage to calculate the threshold (currently $32,354).
We are also changing the indexation of HELP debts, or if you like the interest rate on HELP debts, to be the Treasury 10 year bond rate, subject to a ceiling of 6 per cent.
This means that the Government will lend to students at the same interest rate at which it borrows money. It’s still the best terms on which most people will ever get a loan.
I believe these changes are fair and uphold the fundamental characteristics of Australia’s world-renowned income contingent loan system.
The taxpayer currently pays 100 per cent of the upfront cost of an undergraduate’s education. On average students only ever pay around $4 out of every $10 of that cost.
We know that students who have graduated with a higher education degree earn on average around a million dollars more than if they had not gone to university. Obtaining a higher education qualification is a substantial advantage. It is an investment that reaps dividends for the student.
It is not only the Government that believes the income contingent loan system is fair because graduates have better lifelong prospects.
In his recent book, Battlers and Billionaires, Andrew Leigh identifies the private returns students receive from higher education. Leigh says
It’s easy to see why education is the great equaliser when we look at individual benefit……Compared with someone who finished Year 12 but has no post-school qualifications, a diploma boosts earnings by nearly 20 per cent, while a bachelor’s degree boosts earnings …equating to more than a million dollars over a lifetime.
Labor’s shadow treasurer Chris Bowen is a strong advocate of the income contingent loans system. In his recent book, Hearts and Minds, Mr Bowen recalled that he was among the first graduates to pay HECS (as it was then called) for his degree, and voices his support for the loans system. He spoke of being one of those university students:
… who supported paying for our degrees through HECS. I supported it because I could see the inherent logic: our incomes would be higher because we had been to university.
The Department of Education has established a nine-member Legislation and Financing ad-hoc Working Group. I’m pleased that Claire Field has accepted an invitation to be part of this group.
Chaired by Professor John Dewar from La Trobe, the Working Group will inform the consultation process to be undertaken by my Department.
The Working Group will provide advice to the Government on a range of issues, including the level at which Commonwealth supported places should be funded for different undergraduate qualifications.
The Working Group will undertake careful analysis of relevant arguments and evidence before presenting its advice.
My Department has established another working group to focus on quality, deregulation and information. The TEQSA Advisory Council members have kindly agreed to form the core of this working group with Professor Peter Shergold as Chair. One of its members is Phil Honeywood, the national executive director of the International Education Association of Australia, and a person with extensive knowledge and experience of the full range of higher education institutions.
Conditions of eligibility for non-university higher education institutions to access Commonwealth Grants Scheme funding will be among the policy issues considered through this channel.
The move to the new arrangements through our reform package will be carefully planned. As I said earlier, the changes to funding arrangements will not take effect until 1 January 2016.
And the Government will continue to work with the higher education and research sector to develop the details for implementation.
One of my passions as Minister is to rebuild the international education sector so it is properly supported and recognised as one of our most valuable exports.
There is enormous potential here.
By 2030 the size of the Asia-Pacific middle class is expected to reach 3.2 billion, from about 500 million in 2013.
UNESCO has forecast that the number of internationally mobile students will almost double from four million in 2010 to seven million in 2020, much of this growth in the Asian region.
We want to make sure that international students continue to view Australia as a desirable destination where they can have a rewarding study and living experience that they will remember and benefit from throughout their lifetime.
The Chaney Report, delivered last year, has provided useful advice on the challenges and opportunities for international education.
The Government will continue to work to improve the international student visa regime, building on what has already been achieved in extending streamlined visa processing. Your continuing advice and input will be much valued on this as on all aspects of what we can do to promote international education in Australia.
The Government will also release a draft national strategy for international education in the coming months for consideration by stakeholders.
We will seek views on a range of issues and goals that are important to sustainable international engagement and fully realising the potential of Australia’s international education provision.
I expect a robust discussion of how we can meet the challenges arising from the dynamic global environment and seize the opportunities that it presents.
In closing, I would like to acknowledge the work that has already been done by the people in this room to provide students with genuine choice in higher education.
I believe the recent Budget contains a fair and balanced higher education and research reform agenda which will enable Australia to have a truly world class higher education system that spreads opportunity, achieving benefits for our students and our country.
These changes will deliver genuine choice for all students for the first time – choice in higher education institution and access to Commonwealth subsidies.
I look forward to working with you to build a vibrant, successful and world-class higher education system.