Andrew Norton

A reasonably honest portrait of where the system is now

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On Wednesday, the Minister for Education Jason Clare, spoke at the National Press Club on the interim report from the Universities Accord Panel, chaired by Professor Mary O’Kane, who have been given the job of transforming Australia’s university sector.

The report itself has ambitious long- term goals including parity of participation in higher education between the general population and low SES and regional students with disability. This is a very big ask. The minister himself, in his National Press Club speech, noted that in schools these groups are actually going backward rather than forward. The minister also announced a number of other items, including extension of demand-driven funding to all Indigenous students rather than just students from the regions, as it is now.  

If the interim report’s recommendation is accepted there will be some kind of universal learning entitlement for all students, which essentially means that if they’re academically eligible, the system somehow will find a place for them. It implies that universities and other higher education providers might be obliged to take students rather than just having the choice to take them. This makes it different from the previous demand-driven system, which removed funding caps for bachelor degree students, but did not guarantee a place to all who were eligible. 

There are a number of proposals around research and associated issues. The most contentious one will be the idea of a levy on international student fees. 

How this would work is not entirely clear –  the basic idea seems to be that universities will pay a percentage of their international student fee income into a general fund and that money would be redistributed around research infrastructure and other activities around the university sector. 

A number of universities would be very strongly opposed to that. International students will also be unhappy that the money they’re paying will not be spent in their institutions. 

The minister also revealed some proposed and actual major changes to governance. At the national level the interim report recommends a new body, a Tertiary Education Commission, would advise on costs and writing agreements between the government and universities. 

At the university level an interim report recommendation, which the federal government has already accepted but still needs approval from states and territories, will require senates and councils, their governing bodies, to have different compositions. This would reduce the number of business people and increase the number of people with expertise in higher education. I’ve seen firsthand that sometimes the council members don’t have a deep understanding of higher education as an industry so I  support that recommendation.

The goals here are to deal with some of the staffing problems universities have had, particularly in precarious employment and underpayment of casual staff; and also to deal with issues around students particularly around sexual assault. I believe the Accord panel wants university governing bodies to be more aware of and more responsible for trying to improve the performance of universities on these matters.

But it is important that councils and senates are also not stacked by internal constituencies. There was a problem all those decades ago that governments were rightly trying to address in governance reforms. But having people with real higher education expertise will help, hopefully a number of them from outside the institution whose council or senate they are on.

What’s missing from this report? 

What’s missing is mostly the detail of how we would get from where we are now to where they want us to be. They don’t say a lot on a new system of student contributions, which is one of the most controversial areas they have to deal with. They’ve said that the Job-Ready Graduates package (JRGP) is damaging Australian higher education and has to go, but they have only set out a list of potential alternative student contribution systems. 

The report makes a few asides which hint at their views, which means the panel probably won’t recommend just quickly reversing the charges for art students. Nor do they want a flat student contribution rate, as suggested by some university interest groups. But that still leaves a fairly wide variety of possible alternatives. And so I think we will have to wait until the final report at the end of this year to have an idea of where they’re going on that. 

The main defect of JRGP is that it puts a lot of debt on graduates who have a limited capacity to repay in any reasonable amount of time, particularly the arts graduates who historically don’t earn as much as other graduates. They are being hit with the highest student contribution rate, about $15,000 a year at the moment. My view is that many of them will take decades to repay if they ever do. And while the HELP loan system is designed to allow you to spread repayments over long periods of time, that should be people who are sick or for various reasons don’t work full-time, not for ordinary graduates getting a fairly typical outcome for someone with their degrees. 

The report doesn’t directly mention my proposal for replacing student contributions, which is to link student contributions levels to projected HELP debt repayment times. The goal is that the typical student from different degrees would spent roughly the same number of years repaying their debate, on average. But the minister did mention it in the National Press Club. So that gives me hope. 

Another big political issue, which my student contribution proposal is intended to partly remedy, is the burden of HELP debt. The report mentions ideas which it seems the ATO is already working on, such as taking into account the money students have already repaid that financial year, via the PAYG system, before indexation occurs. 

The Accord review panel are also considering moving the repayment system to what they call a marginal repayment system. This means people with HELP debt would pay a percentage of their income above the threshold, not on their entire income as now. 

The panel does address some long running problems in the system, including not covering the full cost of competitive research grants. I’m not sure that they have new solutions for that, a lot of these issues have been known for a long time. Governments for various reasons have decided it’s too expensive to fix them. 

One potentially complex issue is that the Panel suggests winding back some of the research requirements that were introduced by the Peter Coaldrake review of the regulations for being a university.  That will make it easier for some universities to retain their university status. But there’s always anxiety that universities might be reduced to so-called teaching-only universities, particularly if they are regional institutions. That group will be trying hard to make sure that they get good mission-based funding, which respects the role that their research plays in their local areas. 

I think the report paints a reasonably honest portrait of where the system is. It highlights the problems around staffing. But these exist for reasons which are deep in the funding system. There is no easy way out of the basic structural problems – universities can have better payroll systems that stop the underpayment of casuals but that won’t remove the underlying reasons why they have so many casual staff in the first place. 

The panel and the minister are encouraging critique and alternative ideas. Whether or not we agree with all the ideas presented, that is a good approach to public policy. 

Andrew Norton is Professor in the Practice of Higher Education Policy at the Centre for Social Research and Methods at the Australian National University.  He blogs at andrewnorton.net .au  Follow him on Twitter @andrewjnorton 

Header image of the Minister for Education Jason Clare speaking at the National Press Club from the minister’s Facebook page

Universities Accord: Why this urgent deadline is mission (almost) impossible

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Last November education minister Jason Clare released details of Labor’s election promise ‘Universities Accord’ review of higher education. Its terms of reference are wide-ranging. Skills, equity, quality, funding, engagement, research, commercialisation, workforce, regulation, governance and connections to vocational education are all in the brief.

An ambitious schedule

A consultation paper released last month poses 49 questions for stakeholder feedback. Joining considered answers to these questions into a coherent set of recommendations on the Accord review’s timeline is a near-impossible task. An interim report is due in June 2023 and a final report in December 2023.

The most practical way forward for the seven-person Accord panel chaired by former vice-chancellor Mary O’Kane is to recommend policy responses to pressing problems and policy processes for resolving longer-term matters. Australia’s higher education system has faults, but most of them do not need admitting to the policy hospital via its emergency department.  

Student contribution reform should be a priority

My first submission to the Accord panel, made in late 2022, focused on matters I see as relatively urgent. These include the student contribution system established by the Morrison government’s Job-ready Graduates policy, which more than doubled student contributions for most Arts students, slashed them for nursing and teaching students, and moved most other student charges up or down. The idea was to encourage students to take ‘job ready’ or other ‘national priority’ courses.

The Morrison government agreed in 2020 to a Job-ready Graduates review to commence in 2022. The Albanese government slowed this review down by incorporating it into the Accord process. The student contribution reform timeline now looks like a final Accord report December 2023, legislation 2024, and implementation 2025. 

But every year Job-ready Graduates continues, with the top student contribution now above $15,000 a year, students charged this amount sink further into a debt that will take them many years, and potentially decades, to pay off. CPI-linked indexation of their accumulated HELP debt, likely to be around 7 per cent when applied on 1 June this year, will compound their financial misery.

A June 2023 interim report focused on student contributions would leave time for legislation later in 2023 and new student contributions in 2024. Job-ready Graduates itself worked on similar timelines.

My proposal links student contribution levels to other practical policy issues including HELP debt repayment times. One goal is to align average repayment times between courses, so that the years of work required to clear a debt become more similar. Underlying dollar amounts of debt could still vary. Doctors for example earn more than nurses, so with HELP repayments based on a percentage of income doctors repay more each year and can incur larger debts without causing longer repayment periods than nurses.

Student contribution rates cannot be set entirely in isolation from other policies that might be decided later in the Accord process, such as total university resources for teaching or the overall share of public and private finance. The price relativities between courses could, however, be set this year, with later smaller adjustments to support other policy decisions. Every study of graduate earnings shows arts graduate incomes at the lower end of the range, so arts student contributions would return to the cheapest level. 

The problems of a stakeholder-government ‘partnership’

 For longer-run policies, the Accord panel’s consultation paper suggests a ‘continuous dynamic partnership’ involving the government and sector stakeholders. A formal consultative body to promote regular discussion of higher education trends and performance is worth considering. But giving it a formal role in setting policies and priorities via an Accord ‘partnership’ would be a mistake.

The higher education institutions to negotiate a sector-level Accord partnership do not exist. The sector has many conflicting interests and opinions, within nothing like elections and parliament on the government side to reach decisions seen as legitimately made despite disagreement.

An Accord with real influence over policy direction would accentuate power imbalances. University management and staff are well-organised to promote their views in stakeholder discussion, but student and other groups are less effective. Student income support and HELP debt get little attention from non-student stakeholders. Policies on these topics affect household and public, but not university, finances. The interests of taxpayers are not considered by sector stakeholders, beyond general claims about higher education’s public benefits.

 A government-sector ’partnership’ approach also risks bypassing Parliament on issues that it should engage with, replacing legislated policies with agreements between the minister and universities.

The government should consult, but ultimately it must set priorities and make trade-offs between competing goals. The government and any new consultative body should diligently monitor higher education trends, but direction-setting should not be a ‘continuous’ or ‘dynamic’ process. Well-designed policies let higher education institutions adapt to changing circumstances within a stable set of rules. Such rules are a better basis for successful long-term strategies than deals that change with the mood and the minister.  

Andrew Norton is Professor in the Practice of Higher Education Policy at the Centre for Social Research and Methods at the Australian National University.  He is a member of the Australian Universities Accord Ministerial Reference GroupHe blogs at andrewnorton.net .au  Follow him on Twitter @andrewjnorton 

Header image of the February 21 meeting of the Ministerial Reference Group is from Jason Clare’s Facebook page

Image by Adobe Stock

University research funding and international student numbers rose, and will likely fall, together

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Australia’s universities face  multi-billion dollar annual budget shortfalls over the next few years. Fewer international student arrivals are the single biggest cause of falling revenues. In 2018 26 per cent of university revenue came from international students, up from just 3 per cent in 1990.

Universities were warned about relying financially on international students. Since 2017, for example, the NSW Auditor-General has regularly commented  that NSW universities are highly exposed to international students, especially from China. The Auditor-General’s concerns were ignored. NSW Chinese higher education enrolments increased by 25 per cent between 2017 and 2019.

We need to ask why universities took these risks.

Government funding levels

A common belief  in university constituencies is that the government cuts going back to the 1990s forced universities to find other revenue.

Historical funding evidence suggests a short-to-medium term relationship between university income sources; that if one declines university leaders look for another. Universities have significant expenses budgeted for current and future years. Raising revenue is less painful than cutting spending.

Dips in expected Commonwealth revenue sent vice-chancellors looking for replacement income. A huge increase in globally mobile students this century, especially from China and India, provided a substitute revenue source. The recent push for JobKeeper support as international student fee income dropped is the same dynamic operating in the other direction.

But the sector narrative of continuing government funding cuts is only sometimes true. Teaching subsidies were frozen from 2018, but after a decade of strong growth. Since 2001, total revenue for Commonwealth support students has grown by 165 per cent in real terms. Although students pay more of their educational costs than previously, total public subsidies for teaching went up by 145 per cent.

International student numbers fell for a few years during this public funding boom. But this decline was not a university strategy.  It was a demand-side dip caused by changes in visa rules, a high Australian dollar, and negative publicity in India about crimes against Indian students. After these factors faded, international student enrolment growth resumed and continued until COVID-19 intervened.

The separation of teaching and research funding

Although domestic student funding policies intermittently trigger added recruitment of international students, research funding policies are a more significant factor. While Commonwealth research spending occasionally falls, as it has in recent years, the structure of research funding is a problem as well as the amount.

Over the last 30 years Commonwealth research funding has changed in important ways. The government phased out an overall block grant for teaching and research, which universities could spend according to their own priorities. Instead, teaching and research funding were separated.  If Education Minister Dan Tehan’s reforms receive Senate approval it will be the final divorce between public teaching and research funding.

This separation means that universities are publicly funded for teaching and research based on largely different criteria. For teaching, student numbers drive funding, while research is principally funded according to indicators of previous research success.

Teaching-research academic roles

The problem for universities is that combined teaching and research academic employment, still the single most common role for academics who are not casually employed, assumes a link between teaching and research funding. That is how the same person can be funded to undertake both activities.

In reality, however, apart from money that would be lost in the Tehan reforms, no links remain between undergraduate teaching and research public funding at the university, faculty, department or individual academic level.

The funding logic is that academic employment should be specialised, and indeed we have seen a rise of research-only and teaching-only staff. But teaching-only positions are resisted by academic staff and their union. This trend towards specialisation would have been much greater, except that international students, by typically paying fees well in excess of teaching costs, partially restored what three decades of public policy had worn away, a funding connection between teaching and research.

With financial surpluses on both international and domestic teaching set to take big hits at the same time it is not just the total number of academic jobs in jeopardy. It is the very nature of future academic employment.

Part-funded research grants

In addition to being separated from teaching, research funding was itself sub-divided into competitive project grants, mainly from the Australian Research Council and the National Health and Medical Research Council, and block grants which universities could spend on research-related activities.

Competitive project grants are typically only part-funded, on the assumption that block grants cover other costs. The problem is that research block grants are too low to meet all the costs associated with competitive grants. This means that although competitive project grants bring prestige and additional resources to winning universities, they generate more expenditure than revenue.

Again, profits on international students, by financing part-funded research projects, have helped maintain research practices that might not otherwise have been viable.

Research rankings

Structural changes in research funding have driven universities to recruit international students. But these explanations on their own don’t fully explain the massive increase in research expenditure this century. It nearly tripled in real terms, fueling a similarly large growth in research outputs.

Research rankings have produced an obsession in universities with maintaining and improving their positions. Because many universities around the world want to be in the global top 100 universities simply doing good research is not enough. Universities need rapid increases in both the quantity and quality of research.  It is not coincidence that the Group of Eight universities,  which have the most ambitious rankings goals, ended up most exposed to the international student market.

The future of international education

Australian universities still have a credible optimistic scenario of an international student market recovery starting next year. Although due to the COVID-19 recession fewer students can afford to study overseas at least in the short term, market surveys show that strong student interest remains. If major competitors, such as the UK and USA, cannot contain COVID-19 Australia may take an expanded share of 2021’s commencing international students.

But more pessimistic scenarios are also possible. Entry to Australia may still be restricted in early 2021, especially for students from countries where COVID-19 is not under control. A deteriorating political relationship with China could see a decline in or even the end of our biggest source market. Before COVID-19 highlighted financial risks, a long list of other concerns had been raised about international students, including academic integrity issues, the influence of the Chinese Communist Party, student exploitation, and migration. One or more of these could lead to university decisions, market reactions or regulatory changes that affect student numbers.

If a pessimistic scenario eventuates, the extraordinary increase in Australia university research this century will turn into a dramatic fall in research activity. Many thousands of academic jobs will be lost.

A large international student program is necessary for Australia’s universities. Government spending might increase but it will never match university ambitions. But hubris crept in through an over-emphasis on rankings, encouraging the risk-taking the NSW Auditor-General repeatedly warned against. Some moderation in the international education market is in everyone’s long-term interests.

Andrew Norton is Professor in the Practice of Higher Education Policy at the Centre for Social Research and Methods at the Australian National University. This article draws on a series of blog posts on how Australian universities became reliant on international students. Andrew is on Twitter @andrewjnorton