Be Careful What You Wish For

The Australian government’s recent national spending audit opened a Pandora’s box of proposals, not least in higher education. Now that the federal budget has been proclaimed, it merits closer attention to three items related to higher education—public funding, privatization, and regulation.

Minister Pyne justified a shake up in higher education because few Australian universities appear in the top 50 worldwide. This is the kind of statement we expect from Ministers of Education everywhere, but in Pyne’s case, the reference to the Times World Reputational rankings can only mean that either the Minister is not familiar with the details of his portfolio, or he is pursuing “political points”. The Times rankings give substantial weight to reputation, rather than measurable performance. The much more reliable Shanghai Jiaotong ARWU shows that, while Australia has no entry in the top 50 for 2013, five universities, (Melbourne, Australian National University [ANU), Queensland, University of Western Australia, [UWA) and Sydney) are all listed in the top 100. Considering the relatively small size of the system, that's a respectable result: Canada, in many ways comparable, only has four universities in the ARWU top 100.

An Australian Harvard?

But both the Minister and Treasurer want even better rankings. So what would it take to get even one of Australia’s universities into the upper echelons of this illustrious list? Harvard University, for example, always first in global rankings, luxuriates in an endowment that peaked at US$36 billion before 2008 and is on the way to re-attaining it. It would take the combined total assets of two of Australia’s wealthiest mining magnates (Gina Rinehardt, around $18 billion) or six of its wealthiest casino moguls (James Packer, $6 billion), for even one Australian university to compete in that league. Of course, Harvard is exceptionally wealthy, but other leading US institutions are not that far behind - Yale’s endowment is valued at US$22 billion, and Princeton’s at US$17 billion. In Australia, the University of Sydney’s 2013 campaign set a target of $600 million, compared with the University of Pennsylvania’s US$4.3 billion, Columbia’s US$5 billion and Northwestern’s US$3.75 billion targets. So, if Minister Pyne wants several Australian universities to be in the world’s top 50, he should recommend a vast increase in federal funding to higher education.

Other Funding Sources

Sadly, just the opposite was true. The government’s share of funding is scheduled to fall by 20 per cent, while students will pay substantially more in fees.  This is despite the fact OECD data show that Australian higher education already rates poorly, relative to other member countries, in public support for higher education. Australian students already bear a higher proportion of the costs of their university education than most OECD countries, and the current proposals to remove the current cap on fees would exacerbate the situation. Worse, funding per student has been declining for some time, most notably during the Howard years (1996-2006), when funding actually declined by 4 per cent, in contrast with the OECD average rise of 49 per cent. Students currently contribute 41 percent of the costs of their studies; the Audit Commission proposed raising this proportion to 55 percent. In addition, the proposed reduced threshold for loans repayment, would mean that students would have to commence repayments much earlier and would substantially reduce their lifetime earnings (since repayments would be pegged to the full cost of the loan, rather than the current CPI).

The proposal to uncap fees has proved divisive. Vice Chancellors of the top-tier Go8 universities, have most to gain, and have tended to support a lift on the current fee cap (even though they will lose government funding – one estimated that its Faculty of Arts and Social Sciences would lose $10 million per year, while public funds to Engineering, Environmental Sciences, Communications, and Science would be cut by $5,000 per student). Other Vice Chancellors, with less to gain, and a greater concern with equity, have been more critical, arguing that if fees rise, poorer students will be deterred from studying, particularly from the more expensive programmes. Greg Craven, Vice Chancellor of the Australian Catholic University, warned: “You don't want to have one Rolls Royce, and twelve clapped out Commodores.” The proposal pits students, who are understandably resistant to even higher costs, against (at least the Go8) universities.

Funding the Private Sector

A second reform would see government funding opened to the private sector, a major change in a system that has been very largely public. At a time when, as part of an overall austerity drive, the current national government is proposing to rid itself of thousands of federal public servants, this would seem to be at odds with preserving quality. A major expansion of providers would likely outstrip the capacity of the national Agency charged with regulating the sector (TEQSA). Here, Australia’s recent history of opening the vocational education and training sector to private providers is instructive. In that instance, state government regulators were overwhelmed by a dramatic increase of providers, some of which were genuine, and some of which were much more concerned with generating income than providing quality educational programmes, facilities or staff. As a result, regulators in many states could not maintain quality across the sector, with calamitous results. Headlines appeared of fly-by-night providers, and of international students, particularly from India, who were being misled by the institutions themselves, or duped by unscrupulous agents. When the press in India got wind of such incidents, sensational stories of Indian students being abandoned, duped or attacked spread rapidly in the media. Vocational student numbers from the sub-continent plummeted, and the reputation of the entire education sector suffered. The promised cuts of 50 percent to TEQSA funding raises the prospect of similar risks for higher education.

Not all the implications of how far and how fast the new federal government’s wish to de-regulate and privatize higher education are clear; there are worrying signs that ideology has trumped sober policy. If so, there are threats looming for the sector, including reputational risks that could imperil international enrolments. Be careful what you wish for.