Speech to Australian Financial Review Higher Education Summit
- Minister for Education and Training
Thank you Michael [Stutchbury, Editor-In-Chief, Australian Financial Review].
I congratulate the Australian Financial Review on including the Higher Education Summit as part of its National Policy Series. I also congratulate all of those recognised at last night’s AFR Higher Education Awards, which celebrated the attainment of excellence in a sector whose raison d'être is indeed excellence in learning, excellence in research and excellence for our nation.
There can be few greater honours than serving as Australia's education minister. Our new Prime Minister, Malcolm Turnbull, has afforded me the incredible opportunity to work with dedicated, passionate and knowledgeable individuals across the spheres of early childhood learning, schools, vocational education, training, universities, higher education and research.
An occupational hazard of being the minister is that much of your time is spent focussing on what we can improve or the things that need fixing. However, amongst the many difficult public policy issues and competing funding priorities across every aspect of the education portfolio, I reassure myself that despite the ups and downs of political debate, thousands of professionals continue to get on with the job of doing all they can for our students and our country. For their efforts, including many of you in this room and your staff, both I and the entire government are grateful.
Australia’s higher education system has expanded dramatically from its humble beginnings at the time of Federation, when we had just four universities and 2500 university students.
Long gone are the days when higher education was the province of a privileged few - thankfully! The Bruce Chapman designed income contingent loans, introduced by the Hawke Government, ensured that no matter your background or financial circumstances, you could get a tertiary education if you had the ability. That reform at the time was controversial but it’s unthinkable now that we could have a higher education sector without it.
Today there are more than more than 170 higher education institutions and more than one million Australians studying for a higher education qualification. While our population has increased by a factor of 8 since Federation (from 3 million to 24 million), the student population has increased by a factor of 400 – not including international students.
This, of course, reflects changes in society and the economy, but it also speaks volumes about the value that we now place on higher education — more than a third of 25 to 34 years olds now have a bachelor degree, compared to only 12 per cent a quarter of a century ago.
It’s a system with high levels of student satisfaction and good graduate employment outcomes — only about 3 per cent of all Australians with a bachelor degree are unemployed, versus 8 per cent of those without post-school qualifications.
Our qualifications are accepted currency in the global job market, and this is why Australia is a destination of choice for international students.
Our higher education system has stood us in good stead — in part because it has undergone change as circumstances have dictated that it should. That has kept the system sustainable as the sector has expanded and adapted.
Like Prime Minister Turnbull, I am excited and optimistic about a prosperous future for Australia, one that is built on advances in innovation and productivity. Our higher education institutions should be central to these ambitions. It must, as Professor Chubb wrote in the AFR yesterday:
"prepare graduates for today, and today's workforce, while at the same time building their capacity to cope with the unpredictable future ... graduates who will be curious, nimble and not constrained by the narrow confines of the particular discipline they focus on today. Graduates who will see opportunity in challenge, and be quick to react. Graduates who understand the value or values. People with imagination."
Our future approach to teaching and learning requires agile institutions with their ear to the ground creating the kinds of high quality, forward thinking courses that students desire, and producing the kinds of graduates that industry demands.
As Universities Australia noted in its Keep it Clever policy statement, more than 40 per cent of Australian jobs that exist today may no longer be here in 20 years. And 90% of our workforce may need to be digitally literate in 5 years. Higher education institutions need to work together and with industry to anticipate those changes and adapt their course offerings to prepare the future workforce.
Our future national success also requires our higher education sector to be much more oriented towards making its research effort drive innovation that translates into economic and social benefits to the community.
The AFR’s Ben Potter highlighted the strengths and weaknesses of our research performance recently:
“…that Australia’s $9.7 billion annual public spending on research yields a research output that ranks in the top eight in the world according to the 2015 World Economic Forum competitiveness rankings. Yet Australia ranks a poor 25th in its capacity for innovation – turning those ideas into businesses – according to the WEF, and a miserable last out of 34 OECD countries for collaboration between publicly funded researchers and industry.”
Much of our research is world-class but it is time to think of ourselves as a country of innovators and entrepreneurs, working across disciplines and traditional boundaries to solve problems.
We need to tap into the energy and the smarts of our graduates, and the bright ideas and ingenuity of our researchers to build adaptive industries that sustain an agile economy.
Institutional and business links should run deep, as we need institutions to be the natural partners of business, large and small, as they look to find a competitive edge in the domestic and global market place.
I said at the Times Higher Education Academic Summit earlier this month that our Government aims to build on our already strong higher education system to develop one of the best higher education systems in the world, with some of the best universities in the world. I maintain that such a system would be characterised by excellence, diversity and choice, while underpinned by an equity of access that accords with Australian principles of egalitarianism.
We require excellence in teaching and research, including its impact; institutions playing to their strengths and serving their communities; and choice of delivery method, including accessible pathways to meet individual student needs.
Knowing that we, as a nation, want even more from our higher education system, we need to work out how we create the right policies, incentives and mechanisms to achieve that. And, as always in public policy considerations, the question of how it is paid for, and by whom, must be addressed.
Fortunately, we have a wealth of information to draw upon.
A review of reviews
Over the years, successive governments have grappled with how to fund higher education and research, how to measure it, how to inspire greater excellence and how to encourage greater commercialisation of publicly-funded research. They have commissioned reviews, presided over reforms, poked, prodded, tinkered and occasionally given the system a good shake.
Formal reviews and inquiries have been grappling with these issues over many years – from Dawkins in the 1980s, to West in the 90s, to Nelson and Bradley in the noughties, the Lomax-Smith Review, the National Commission of Audit and, most recently, the Kemp-Norton Review.
I asked my department to go through the reports of these reviews to see what we can learn from them – what issues were they trying to address, and what did they recommend - a literature 'review of reviews' if you like!
In looking at the initial summary of these reviews there is an uncanny sameness about many of the conversations. I will publish a copy on the department’s website today so you can have a look, but want to step through a few recurring themes with you today.
Let's start by talking money, which so often sits at the centre of reviews or as a prime point of tension between policy makers and institutions.
The Dawkins White Paper talked in plain terms about the need to find "new sources of funding" to achieve further growth in the system, and the potential for graduates to make a contribution. From this, HECS was born.
Others since then have engaged with the question of how much graduates should pay. As the Nelson review put it:
"Many submissions to the Review call for increased public funding to maintain or improve the quality of higher education. However, given the private benefits that accrue to the individual, it can be argued that any increased per capita investment could be funded in part by those who are directly advantaged."
And from Kemp-Norton:
"It is now generally recognised that, with the development of mass domestic and international markets it is good public policy to encourage investment in higher education, and that the level of investment required cannot be found exclusively from taxpayers through government budgets. Nor should it be, given the substantial private benefits many students obtain from their education."
Kemp-Norton also looked at the sustainability of the Government's loan book under the different components of the HELP scheme identifying the need to look at:
"whether students should contribute more than inflation indexation to the cost of maintaining more than $30 billion in HELP debt, the write-off of HELP debt when people pass away in full, the income threshold at which repayment is required, and the collection of HELP repayments from overseas."
While Bradley acknowledged that the Commonwealth Grants Scheme, or CGS, should not be a static instrument:
"The panel encourages the government periodically to review the distribution of these subsidies to ensure that they continue to meet ongoing requirements of the higher education system and are not simply historical artefacts."
Each of these are fair questions to ask or issues to raise. Higher education is expensive and it has to paid for somehow, from the public purse, from the direct beneficiaries of that education or from a combination of both.
If we thought it was expensive before the introduction of the demand driven system, we have had our eyes opened in the past few years.
The demand driven system has seen unprecedented growth in higher education participation—a 25 per cent increase in Commonwealth supported undergraduate places in just six years, from 2009 to 2015.
Government expenditure on higher education teaching and learning has increased by 55 per cent—from about $8.6 billion in 2009 to $13.3 billion this year.
This growth is puts a real strain on our ability to support so many students. We have the most generous income-contingent loan system in the world, but with a growing system and a tight fiscal environment, we need to honestly address how much taxpayers should contribute to a person’s higher education?
On average, a student pays around 42 per cent of the cost of their education. The taxpayer picks up the rest. In the case of the most expensive courses (dentistry, medicine and vet science) the student pays only around 32 per cent of their course costs. We know that many of these graduates go on to have the highest incomes.
Nobody enjoys a debate about 'who pays' anymore than a discussion about tax reform. But it is necessary that teaching and learning is properly funded. It is necessary that we honestly discuss the extent of cross subsidisation from teaching to research, as identified by Vicki Thomson from the G8 in her contribution yesterday. And it is necessary that we find long term, sustainable and fair approaches to funding for students, institutions and taxpayers alike.
A second, important theme that has been more evident in later reviews is the need to look beyond a narrow perspective of what is subsidised and who is encouraged to participate in the supply side of the higher education market.
Bradley touched on it in 2008, identifying that:
"The system of financing the higher education sector is complex and confusing. Reform is urgently required to make the financing system more consistent among different categories of higher education providers."
Kemp-Norton similarly identified the role of non-university providers. It also brought to the fore challenges in a government funding model that puts all its eggs in the basket of undergraduate degrees, urging us to look beyond bachelors as the optimal outcome or ideal starting point in nearly all cases. They said:
"Non-university providers play a major role in delivering pathway programs into university, reflected in sub-bachelor courses. Private providers are especially important in the provision of sub-bachelor courses. Such courses comprise 36 per cent of private higher education provider commencing undergraduate enrolments, compared to 4 per cent in public universities. Pathway programs are a good alternative to direct university entry for students who are less well prepared for higher education."
It is, unquestionably, a market distortion that universities can attract unlimited subsidies for bachelor level degrees, yet are capped or restricted in every other way, aside from full fee paying international students. The expansion of sub-bachelor programs has been one of the most important yet least discussed elements of proposed reforms. This should be an area of focus but, as always, I emphasise that such expansion must be paid for, somehow.
I am also sympathetic to ensuring equitable treatment among higher education providers, including many niche private operators who have delivered exceptional quality products over many years, but I do deliver a word of caution on this front. I am somewhat scarred by the mess I've been working to clean up in the poorly regulated vocational education market that was opened up by the previous Labor government.
Done well, contestability and student choice should enhance learning outcomes and increase value for money. But quality must be guaranteed and government funding should never be structured in such a way as to attract providers like bees to a honeypot. I will tread very cautiously and double check every quality safeguard in reforms such as this.
The equity considerations in looking beyond university offered bachelor degrees also extends to the operation of student loans. For example, around 250,000 students (or 23 per cent of borrowers) have to pay a 20 or 25 per cent fee on their HELP loan - a fee that the other 850,000 students (or 77 per cent) are not required to pay. These same students are subject to a borrowing limit that does not apply to other borrowers. Why? Because they choose to do their course at a TAFE or other higher education institution instead of at a public university.
There is a valid need to stop treating non bachelor degree and/or non university pathways as second class options. Our economy demands much more variety than a homogenous solution.
Excellence & Individuality
Speaking of homogeneity, probably the most common feature of all of the reviews undertaken since Dawkins some 28 years ago - and the last I will touch upon today - has been the need to create a system that responds to the changing skills needs of our economy, encourages universities to individualise or adapt themselves to local circumstances, and ensures that we boast institutions of global excellence in fields that continue to lift our national prosperity.
Based on the recurring messages in these reviews, our universities appear to achieve elements of excellence and individuality in spite of policy settings, rather than because them.
In the 1990s, West said that "institutions have few incentives to be innovative or to re-engineer traditional approaches to teaching and administration."
The Nelson review also found there were "no real incentives for institutions to diversify or specialise their course offerings or engage with their local communities to ensure that they are being responsive to student and community needs."
You could say the demand driven system came along to change all that – it certainly sought to, with Bradley recommending that the new funding arrangements "permit a diversity of approaches by institutions while also encouraging excellence and accountability."
But Lomax-Smith heard that:
"Submissions argued that there is inconsistency between the demand driven system of undergraduate places and capped student contribution amounts. It was argued that this will limit the provision of differentiated and higher-quality course offerings. The Panel received representations from the sector suggesting that the present funding model did not support the development of particular areas of innovation and excellence."
The Kemp Norton Review found that there was now pressure to innovate, individualise and achieve excellence, but identified constraints on universities doing so, saying:
"There are new pressures to compete on the quality of teaching and the student experience in ways that are not always achievable on current funding rates associated with Commonwealth supported places. Although the demand driven system has brought additional resources into higher education, the system also imposes a ceiling on those resources."
We need to encourage entrepreneurship and back institutions to chart different and innovative courses, as we did when the University of Melbourne proposed its new curriculum model.
Institutions must be able to respond to students seeking greater flexibility than ever before. Today’s students want to study what they want, when, how and where they want – including wholly online, while having the same access to high quality learning experiences and access to work experience.
We need to build a system capable of meeting diverse needs. But do current incentives help or hinder this goal? Surely a one size fits all model of funding drives homogeneity more than individuality; commonality more than excellence?
Our government believes we should back universities to enjoy greater autonomy because we believe that by allowing them to adapt to their own, local circumstances, or to pursue excellence or innovation in their own way, we will get much better outcomes for students, researchers, our economy and our society.
That is why we have only delayed our proposed reforms, not abandoned them. But this delay does allow me a period of consultation; time to improve them and to secure majority support for any enhanced package of reforms.
As I told The Times Higher Education Summit, I will be consulting with the higher education sector, students, employers, my Senate colleagues, and other stakeholders on how we can best find a sustainable basis for students, universities and taxpayers to fund an adaptive and world-class higher education system, with fair, equitable access for students.
I also emphasised my personal experience at that event - government schooled, from a below average socio-economic area, with parents who never attended a university. I do so again to once again emphasise that I am resolutely committed to equitable access. I will only ever champion reforms that achieve both equity and excellence.
Today I have deliberately highlighted just some of the many reviews, studies and inquiries that our higher education sector has been subjected to. I also recognise that many of you have already provided very thoughtful submissions to governments as part of these reviews, including over the past year or so.
I will be taking a fresh look at your proposals as I equally continue to engage in discussions with many of you. I invite all stakeholders to think about how we can make progress on the elements of reform on which we agree, including the compromises that may be necessary to achieve that progress.
It would be easy, thanks to the intense focus on the reforms that had stalled, to think that no progress has been made in the last couple of years, but that would be wrong. Under the new higher education standards we have introduced, universities will be measured on how they are delivering students a quality experience, not filling out paperwork.
We have launched QILT, which will help prospective students compare the quality of teaching and learning in Australian higher education institutions and the success of recent graduates in the job market, empowering them to make informed choices about their further study.
We are protecting and strengthening our income-contingent loan scheme. Those with Australian income contingent loans who work overseas will now be required to make the same income-contingent repayments they would make if they were working in Australia. We have also introduced legislation to extend these loans to long-term New Zealand residents.
We have reduced regulation and reporting requirements in higher education, cut red tape and had the Tertiary Education Quality and Standards Agency focus on risk while letting low-risk institutions get on with it.
We have ensured funding for key research initiatives, including the Future Fellowships and the National Collaborative Research Infrastructure Strategy, which the previous Government left unfunded after June 2015.
In the near term, the Government will be considering the findings of a review of research infrastructure which I hope can lead us to long-term, sustainable funding for national scale research infrastructure.
We are working hard to encourage stronger links between research and industry to increase the impact of our research effort. The Boosting the Commercial Returns from Research Strategy sets out practical actions to maximise the return on our nation’s investment in research by driving innovation and productivity in Australia. Similarly, the review of research policy and funding arrangements led by Dr Watt will help improve collaboration between research and industry to increase the commercial returns from Australia’s research effort.
These measures will, of course, help to inform the innovation statement under development by Prime Minister Turnbull and Minister Pyne.
We are supporting strong international linkages through the Government’s signature initiative, the New Colombo Plan, which supports Australian undergraduates to undertake study and internships in the Indo-Pacific region.
We are also working to ensure a stronger and more competitive international education industry. We will implement a new Simplified Student Visa Framework mid-next year. We are streamlining and updating our Education Services for Overseas Students framework to improve the competitiveness of our international education sector while maintaining important student protections. And we are improving the quality assurance of Australia’s international education agents through a code of ethics and a quality assurance framework.
These initiatives contribute to the objectives of a national strategy for international education, which we are working with stakeholders to finalise. The strategy will benefit from a new dedicated Minister for International Education, Senator Richard Colbeck.
The future—a new conversation
Our higher education system has evolved over time thanks to the investments and policy changes of successive governments.
Forums like this one are important—they provide an opportunity to consider and debate the issues of the day. I hope you will appreciate that I genuinely want to find a way forward that makes the sector stronger, more autonomous and better able to meet the challenges of a rapidly changing world.
Funding is important, but alone it will not propel us to economic prosperity. How we best utilise significant public and private investment, how we break down some of the cultural barriers between the higher education sector and industry in working together to realise the economic benefits of world-class research, and how we can reach a consensus on the higher education needs of students, industry and institutions are things I encourage you all to consider and discuss with me.
I know that it is not just up to you. I also want business to see our higher education institutions as a valuable resource to help them solve their problems and achieve their goals. Collaboration is a two-way conversation. We can’t do things the way we have always done them. We need to adapt and respond to changing conditions.
As the Prime Minister told the AFR's Laura Tingle on Friday:
In an age of rapid disruption and volatility you’ve got to be much more agile and that means you have to be prepared to embrace different ways of doing things. You can’t just assume the way you did things last week will work, and that requires in some ways a different style of leadership.
As the new Minister for Education and Training, I am bringing this approach to my consultations on higher education reform. I am up for a robust and constructive discussion because I am convinced that in an age of often volatile and disruptive change our nation needs our higher education sector to stay ahead of the game and lead the way. And I know that the people in this room can help us to do so.
Thank you for your contributions to date and for all that our nation needs you to do in the future. I look forward to working with you all.