Subsidy shifts and fee hikes on the menu for Australian universities

Potential changes flagged by education minister Dan Tehan could result in Australian universities being able to shift bachelor’s course subsidies to their postgraduate programmes, and vice versa, as well as higher fees for students.

Mr Tehan told the Universities Australia conference that he wanted to “cut red tape” and give universities the autonomy to use their teaching grants more flexibly. The idea builds on a change announced last November that allows universities to switch subsidies for diploma and postgraduate courses, and even permits horse-trading of allocations between institutions.

Extending the arrangement to bachelor’s programmes could significantly boost universities’ ability to use money they have already been allocated. Some cannot recruit enough students to expend their undergraduate funding quotas, while others do not have enough bachelor’s subsidies to satisfy student demand.

Mr Tehan proposed the idea as part of a “two-pronged” strategy for the sector that is designed to “wring every last dollar” from current funding before asking taxpayers for more. This would help to accommodate a looming spike in the university-age population.

“If we are going to present a case to the Australian public, then we are going to have to work together to build that case,” Mr Tehan told the conference. “My view is we can do that. There’s no reason we can’t, even given the unprecedented challenges we are facing this year.”

While university leaders at the conference welcomed the extra flexibility, a second change flagged by the minister will prove contentious.

Mr Tehan said the “connection between public-private benefit and cost of education” had “decoupled” over the three decades since university tuition fees were reintroduced by John Dawkins, who was the education minister then. “We need to be able to much better articulate that benefit and cost with the broad Australian community and be willing to adjust it to 21st-century values and conditions.”

He told Times Higher Education that public-private benefits and costs lay at the “forefront” of the government’s policy to ensure the system provided value for the taxpayer dollar, citing the recent introduction of performance-based funding. But Innovative Research Universities executive director Conor King said public-private benefit was “code for how much students pay” and a difficult concept to apply in practice.

“I’ve never seen anyone attach it in any meaningful way to an actual split,” he said. “You’d have to say 50-50 sounds like a nice, simple explanation as opposed to a deeply considered economic rationale.”

Australian university students currently contribute about 42 per cent of the costs of their courses, on average. Estimates of the individual benefits from degrees, as opposed to the broad benefits to society, range between about 40 per cent and 60 per cent.

Two recent government attempts to increase student fees − a 2015 proposal to deregulate them and a 2017 shot at raising them by 7.5 per cent − were both blocked by the Senate.

Justin Wolfers, an economics professor at the University of Michigan, said the public-private benefit of education was one of the “externalities” that economists struggled to measure.

“We think they’re somewhere between not very important and unbelievably, incredibly important,” he told the conference.

Higher education policy expert David Phillips said raising tuition fees was the most obvious of the “relatively brutal” options for increasing university funding to meet the demographic bubble. “It’s the most straightforward politically, I suspect, although it’s not straightforward in the Senate.”

john.ross@timeshighereducation.com