Address to the Committee for Economic Development of Australia (CEDA), 16 May 2014, Adelaide

Speech
  • Minister for Education
  • Leader of the House

**Check against delivery**

I’m very pleased to be with you today in my home state of South Australia to talk about the very important topic of the future of higher education in Australia.

Before I begin I’d like to acknowledge Ian Stirling, the CEDA State President; and the Vice Chancellors who are present:  Professor Michael Barber from Flinders University, Professor David Lloyd from the University of South Australia and Professor Warren Bebbington from the University of Adelaide.

I’m very happy that you were able to join us.

Introduction

This week’s federal Budget contains the biggest reform of our higher education system in 30 years. The higher education reforms are a fair and balanced package that spreads opportunity for students and ensures Australia will not be left behind.

By 2018 an additional 80,000 students per year will receive Government supported places in courses of their choice.

I want Australia to have the best higher education system in the world. These reforms will help us to achieve this ambition.

The best higher education system in the world

In a speech at Monash University last week, I set out my vision for what the best higher education system in the world would look like.

For me, the best higher education system would provide more opportunities for students from all backgrounds to choose the course and the type of higher education provider that is right for them. There would be a wide diversity of good choices for students.

In the best system, higher education would be affordable for students, with no upfront costs for them. Costs would be shared fairly between students and taxpayers.

The best higher education system in the world would continue to recognise that disadvantaged students need additional support to enrol in and complete higher education.

The system would provide world class teaching and research with some of our universities being among the very best in the world. All higher education institutions would be pursuing their particular goals as well as they possibly could.

In the best higher education system in the world students could choose to study where and what they want, and universities and higher education colleges would have the freedom to provide the very best education in the world to meet the needs of their students.

The Government’s role would be to help students and promote research, uphold the quality of the system without unnecessary red tape and make sure the taxpayer’s contribution to the cost is well spent.

The world’s best higher education system would enhance both quality and access. It would provide good information to help students and their parents make decisions about study options.

It would prepare students for the jobs of the future, not only those that exist now.

The best higher education system in the world would give universities and colleges greater control over their budgets and their capacity to attract and keep students.

Universities and colleges would not be weighed down by unnecessary red tape and would be trusted to do what they do best – excellent teaching and research and nurturing students.

The higher education reform package in the Budget will help lay the foundations for achieving such a world-leading system.

The challenges for higher education and research

With this vision in mind, in framing the federal Budget for higher education and research, the Government faced five significant challenges.

The first was that we must repair the national Budget, given the unsustainable Budget deficits and ballooning debt that we have been left by the previous government.

Second, Australia’s higher education and research systems are at risk of being left behind and overtaken by the growing university systems in our region.

Thirdly, growth in the number of higher education students as a result of the introduction of demand driven bachelor degree places is driving up the cost of higher education to the taxpayer. But there are compelling reasons to expand the demand driven system to support more students – spreading opportunity further for students, which is what we are doing.

Fourth, the previous government also left us with funding cliffs for essential research programmes.

Fifth, we had to meet all those challenges in ways that are fair and reasonable both to students and to taxpayers.

The higher education and research Budget package

In confronting these challenges, it became increasingly clear to the Government that we needed far reaching reform.

The resulting higher education and research reform package has five major themes:

  1. Expanding opportunities for students
  2. A sustainable Higher Education Loan Programme
  3. A sustainable higher education system overall
  4. Investing in research excellence
  5. Upholding quality.

The reform package takes very careful account of consultation through processes including the Lee Dow/Braithwaite review, the Kemp/Norton review and the National Commission of Audit.  It draws on much discussion over many years on how to spread opportunity for students and how to ensure that Australia has the best higher education system we can.

It also draws on the many informal opportunities I’ve had to consult with the higher education sector both before and after I became Minister for Education as well as the considerable interaction between my department and my office and the higher education sector.

What do the reforms mean for students?

As a result of these reforms, for the first time ever, students studying at any registered higher education provider will have their place directly supported by the Australian Government.  This includes higher education students at TAFEs and private education colleges. It also includes all accredited higher education diplomas and advanced diplomas as well as associate degrees and degrees.

These reforms will expand options and pathways for students less well prepared for university, while funding a wide range of qualifications that lead straight into jobs.

Professor Peter Lee the Chair of the Regional Universities Network has welcomed this saying:

We are particularly pleased that the Government has decided to keep the demand driven system for bachelor places and extended it to sub-bachelor places. This will assist in providing pathways and lift participation in higher education in regional Australia for less well prepared students.

Andrew Norton from the Grattan Institute and one of the co-authors of the recent review I commissioned on the demand-driven higher education system has said:

TAFEs and pathway colleges meet the needs of a wider group of people seeking higher education. …  Students who arrive at university via a pathway college do much better than would otherwise have been expected, given their prior school results.

Supporting students into diploma pathway courses will reduce drop-out rates for students who enter degree courses before they are ready because places on pathway courses are currently either unavailable or more expensive.

Andrew Norton went on to say

Although the academic outcomes are good, in private colleges students have to pay fees that are often $5000 to $10,000 more than they would pay at a public university……noting that under the Government’s reforms “many of these students would pay much less than they do now.”

Fair contributions to the cost of higher education

In addition to supporting an additional 80,000 students in these ways, we are freeing our universities to determine their own fees. The level of student contributions will be determined by what universities and other higher education providers charge, and by what students choose to pay.

Universities and colleges will have to compete for students, and when universities and college compete for students, students win. They win through a better range of courses offered to meet their needs, through greater focus on the quality of teaching and other support for students, and on price.

We will never have the diversity of choices for students and the quality of courses that we need without fee deregulation.

Competition between universities and colleges will help to prevent fees from rising excessively.

Some fees will go up, and some will go down. We can be confident that some will go down because for the first time ever, the Commonwealth will be supporting all students in all undergraduate courses, from higher education diplomas to bachelor degrees.

With 80,000 students funded for the first time, some fees must go down.

The new system is fair and reasonable, because students gain enormous private benefit from their education, and it is reasonable that they pay a fair share of the cost.

The taxpayer currently pays 100 per cent of the cost of an undergraduate’s education upfront, and on average students only ever pay around $4 out of every $10 of the cost.

Students are not required to make any payments upfront.  They take out a loan from the taxpayer through HELP and only begin to make repayments after they are earning over $50,000.

For students the decision to invest in their own future is the best investment they will ever make.

Australian university graduates on average earn up to 75 per cent more than those who do not go on to higher education after secondary school. Over their lifetime graduates may earn around a million dollars more than if they had not gone to university.

Higher education is worth it – and students know that. Quoting from Andrew Norton again,

Historical experience suggests that prospective students from low socioeconomic backgrounds are not generally put off by higher charges if income contingent loans are available.

No current undergraduate student will be impacted by changes to student contributions. They will be ‘grandfathered’ – supported on the current terms - until they cease their current studies or until the end of 2020, whichever is earlier.

A strong focus on equity

Our package of reforms has a very strong focus on equity.

Higher education students will continue to be supported by Australia’s world renowned Higher Education Loan Programme or HELP. These loans ensure that students do not face up-front costs and do not repay until they are earning a decent living. As I said, no student needs to pay a dollar up-front.

For the first time apprentices will also have access to income contingent loans, to encourage more young people to take up a trade and complete their qualification.  This is through the Government’s HECS-style Trade Support Loans programme.

We are also eliminating the loan fees that apply when students borrow to study under the VET FEE-HELP and FEE-HELP schemes. This will mean students can borrow on the same terms as each other, rather than the current unfair inequalities.

The Government did not accept the recommendation of the National Commission of Audit to reduce the threshold for repayment to the level of the minimum wage. We believe that students should only repay their loan from the taxpayer once they are earning well above the minimum wage. A new repayment threshold of $50,638 will apply from 1 July 2016, and at that level graduates will only have to pay 2% of their income in repayment of ther loans.

Students from disadvantaged backgrounds will have access to the largest Commonwealth Scholarship scheme ever.  Higher education institutions will be required to allocate $1 in every $5 of additional revenue they raise from student contributions to a new Commonwealth Scholarships scheme.

Students will receive individual, tailored, support from their higher education provider through the new Commonwealth Scholarships scheme. This will include needs-based scholarships to help meet costs of living as well as fee exemptions, mentoring, tutorial support and other assistance at critical points in their study.

This will help many students from regional Australia and outer metropolitan areas, many Indigenous students, low SES students and others who are first in their family to access and complete higher education qualifications.

The Scholarships will allow the best students to get the best university education that is right for them.

This is in addition to the extra support being providing by extending the demand-driven system to students studying diploma, advanced diploma and associate degree courses so that they can access a pathway to a bachelor degree or a qualification that leads directly to a job.

Additionally, the Higher Education Participation Programme helps disadvantaged students by funding universities to undertake activities that improve access to higher education for people from low socio-economic status backgrounds.  It also supports disadvantaged students to remain in their course and complete their qualification.

The new Commonwealth Scholarships will provide a significant boost to resources for these activities.

More choice and quality

The reforms will allow universities and higher education providers to compete more effectively for students.

As a result, students will have more choice and universities and colleges will need to put more effort into meeting the needs of students. They will need to become more innovative and continuously improve the teaching and learning they offer in order to attract students.

A sustainable higher education system overall

The demand-driven system of undergraduate places has greatly increased access to university undergraduate degrees for Australian students, and this is something we applaud. But it needs to be financially sustainable. Uncapped student places are now estimated to cost an additional $7.6 billion over the five years from 2013-14.

Given our national Budget challenges, it is essential that the higher education system remains on a strong and sustainable financial footing. This means there were some Budget measures that resulted in reductions in funding, ending programmes that don’t work or requiring additional contributions.

As part of a Government-wide decision to streamline and simplify indexation for programmes, payments to higher education providers will be increased with inflation using the CPI from 1 January 2016.

Also, universities will be able to charge Research Training Scheme students undertaking Higher Degree by Research courses a contribution towards the costs of their degree.

Investing in research excellence

I’m very pleased that the Budget includes on-going investment in essential research programmes. Research addresses the world’s most pressing problems and challenges facing mankind. Research in Australia helps our successful businesses grow and increase their earnings and boosts Australia’s overseas exports. It helps to ensure that we keep jobs in Australia.

World-class research requires high-quality facilities and talented researchers. Yet the previous government left us with a situation where there was not a single dollar set aside for the National Collaborative Research Infrastructure Strategy beyond 30 June next year.

And there was no provision for any new awards for the Future Fellowships programme that supports mid-career researchers to undertake world-class research in Australia.

We will provide $150 million in 2015-16 for the continuation of the National Collaborative Research Infrastructure Strategy. This investment is supported by the findings of the National Commission of Audit that ‘Quality research infrastructure is a critical component of Australia’s research and development system.’

A review of the Strategy will commence in the near future.  This responds to the Commission’s recommendation that the Government commit to ‘ongoing funding for critical research infrastructure in Australia, informed by a reassessment of existing research infrastructure provision and requirements’.

The government will also fund 100 outstanding mid-career researchers every year through the Future Fellowships Scheme. These researchers will each receive funding for four years to undertake their vital research.

This will reduce the risk of ‘brain-drain’ where our best researchers can leave Australia for jobs overseas. This will contribute to maintaining Australia’s long-standing reputation for producing world-class research.

This will be an ongoing programme and $139.5 million has been provided for this over the next four years.

The Budget also delivers on our election commitments to direct research resources to key national priorities. Australian Research Council funding has been reprioritised including $26 million to accelerate research into dementia, as part of a larger $200 million government initiative on dementia; $42 million to expand the Australian Institute of Tropical Health and Medicine at James Cook University; and $24 million to support the Antarctic Gateway Partnership in Tasmania.

This is in addition to the $35 million over five years through the Australian Research Council that has already been provided for the Juvenile Diabetes Research Foundation's Clinical Research Network.

The Budget also establishes what will be the biggest medical research endowment fund in the world.  The Medical Research Future Fund will grow to an investment of $20 billion. This fund has the potential to enable Australia to be the source of treatments and cures for life threatening diseases including cancer and heart disease.

Upholding quality

A key element of the Government’s plan for higher education is to give universities and colleges the freedom to do what they do best – excellent teaching and research.

Quality will be upheld by increased competition and by ensuring that the body responsible for ensuring quality in the sector – the Tertiary Education and Quality Standards Agency - focuses on its most important activities.

Quality will also be driven by providing better information for students and their parents about study options. Students need clear information about the quality of their course, how successful previous graduates have been at securing jobs and what other students and employers think of the course.

An expert reference group has made recommendations about how this information can be collected. The new information will be presented in an accessible web-based format from later this year.

Avoiding being left behind

The reform package has been designed to ensure Australia’s higher education and research system is not left behind.

This risk has been highlighted by Universities Australia’s in their campaign Keep it Clever. I fully agree with Universities Australia on the risk of being left behind, and the need not to be.

As I’ve noted before, while five years ago there were no Chinese universities in the top 200 universities in the Academic Ranking of World Universities, today there are five. In the same period only one Australian university has entered the top 200, joining six Australian universities already there.

My aspiration is to not only keep up with our competitors, but to keep ahead of them.

To do this Australian universities and higher education colleges must not stand still.   We must give them the freedom and the confidence to be the best they can be.

Investment in education

The Government is investing in higher education and research because we believe in opening up opportunities for all Australians to prosper.

As a result of the Budget, total education and research funding in my portfolio will continue to grow by around $5.7 billion over the next four years.

Higher education and research funding will grow by over $950 million over the same period.

Total higher education, research and international education spending will be $48 billion over those 4 years. $11 billion of this will be for research.

It is vitally important for every Australian student to get the best education they can - no matter where they come from and what their parents do.

The government is determined to support more young Australians to get a good education and contribute to our society and the economy through their skills and research.

I’m pleased to note that Belinda Robinson, Chief Executive of Universities Australia, has recognised that ‘the Government has sought to keep higher education affordable and accessible….. striking the balance between student and taxpayer affordability’.

Deregulating the higher education system

Deregulation of the higher education system has been widely supported.  This includes statements by Dr Andrew Leigh, a former professor of economics at the Australian National University and now a Labor Member of Parliament, 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.

It said further:

Market-based HECS will also help to improve our higher education system by making universities even more responsive to student needs and educational outcomes………. Much-needed additional funding will be available to universities that capitalise on their strengths and develop compelling educational offerings. The result will be a better funded, more dynamic and competitive education sector.

That is what we need – ‘a better funded, more dynamic and competitive education sector’. And that is what the higher education reform package can achieve.

Closing

The move to the new arrangements will be carefully planned. The changes to funding arrangements will not take effect until 1 January 2016, giving higher education providers time to prepare.

The Government will continue to work with the higher education and research sector to develop the details for implementation of the package.

I would like to urge university and higher education leaders to seize the exciting opportunities that this reform package provides.

It creates new and improved opportunities for Australian students from all backgrounds; and new opportunities for a diverse, high quality and world-leading higher education system.

These reforms are about spreading opportunity and making sure Australia is not left behind.

They are fair for students and fair for taxpayers, and create the context in which we can develop the world’s best higher education system in Australia.

Ends

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