Search the site

News categories

News archives

RSS feeds

Christopher Pyne’s University Reform Fiasco

The most profound changes in Australian universities occurred during the term of John Dawkins as Education Minister in the Hawke government. Institutional mergers saw colleges devoted mainly to teaching amalgamated with universities devoted to teaching but more particularly research. The HECS (Higher Education Contribution Scheme) and competitive research funding through the Australian Research Grants Scheme were introduced. I was told once that Dawkins considered universities were in effect conducting a business and that therefore they should be treated like a business. Whether Dawkins understood anything about how businesses, or universities, worked is another matter.

Now, as economics commentator Greg Jericho (on ABC’s The Drum on 4 June) and many others have pointed out, the Abbott Government has not only cut funding but completely changed the arrangements – shifting to a deregulated system and changing the way HECS/HELP debt is repaid, including requiring interest to be paid on the debt. Education providers will have to contribute 1 in every 5 dollars raised through fee increases to scholarships for disadvantaged students and HELP loans will be available to another 80,000 students. Is that really the most economic and equitable way to provide access to university education? The involvement of commercial providers is deeply problematic as shown by the experience in Victoria and New South Wales where poor quality providers claimed funding for courses of doubtful value. The fact that no cap on funding was set meant the funds ran out and reputable Colleges of Technical and Further Education lost funding and staff along with the rest. A loophole will allow small ”for profit” higher education providers to avoid that obligation because they will have less than 500 students.

As part of the overall budget legislative package $174 million in funding will be cut from the Research Training Scheme and doctoral students can be charged to make up for it.  A 3.25 per cent “efficiency dividend” will be applied to the Australian Research Council in 2015-16 amounting to $175 million over three years. (Over 10 years a cut of that magnitude reduces funding by 34% in real terms.)

The budget for 2014-15 doesn’t match the election promise. (As in so many other areas!) The Liberal party pledged in its overall policy document – not its education policy – that it would “ensure continuation of the current arrangements of university funding”.

The most recent big increases in funding of universities occurred in the 2012-13 budget. But in the next two years, through a variety of changes, major reductions occurred. Funds originally allocated for improvements in teaching were reduced to fund the cleanup after the Brisbane floods and further cuts were made to fund the Gonski school reforms.

Australian public funding of universities is among the lowest in the OECD: that has been known for years. In 2010 it was about 0.8 per cent of GDP compared to the OECD average of 1.1 per cent. Private expenditure was 0.9 per cent of GDP, well above the OECD average of 0.5 per cent. The result still put Australia at 1.6 per cent of GDP, below the OECD average of 1.7 per cent.

On a per student basis public funding is below average and, as Jericho points out, shows Australia already as more reliant on private expenditure. The increasing reliance on private funding drives Australia towards the US model without the ability to raise money as the US system does through college sports, private endowment and the loyalty of rich alumni. The increasing debt loads graduates with a debt forcing them to even more difficult choices about investing in already overpriced [in Australia] housing, the principal source of enduring wealth. The costs prescribed in the proposed fee increases roughly double the exisiting costs and changes to the income level at which repayment will commence together impose extraordinary hardship. This is based on the proposition that the gains of university attendance accrue almost entirely to the individual because they end up achieving higher salaries. But in Australia, unlike the US that is not so: in Australia the economic gains to the community are about twice the gains to the individual as shown by recent OECD analysis which contradicts some other views such as that from the Grattan Institute which uses spurious logic. “Higher education benefits the public … such as higher volunteering rates, more civic behaviour, and greater cultural acceptance. However, in almost all cases the public would reap these benefits anyway. Graduates are such big winners that people would study even without subsidies. about voluntary community contributions being likely irrespective of the cost of fees.”

Deregulation of fees will allow universities to effectively charge what they want. Minister Christopher Pyne, on ABC TV’s Insiders on 1 June, suggested this freeing up of the pricing mechanism would actually lead to lower prices because of market forces.

In fact because of the cuts to public funding, all universities will have to increase fees to cover costs. And the top universities have been given in effect a license to print HECS/HELP debt, as Jericho put it.

Jericho branded Pyne’s assertion about the operation of a real market as “bollocks”. “The price signal initially will be weak, because people will not pay the debt till later. But given the other change to the policy is to have HECS/HELP debt repaid at the long-term bond rate (capped at 6 per cent), that signal becomes much louder.” The impact will mean large universities will be able to trade on their prestige and charge higher fees. The smaller/regional universities will need to entice students with lower fees (relative to the large universities). But given public funding is being cut this will likely see such universities unable to sustain the same number of courses – causing a further reduction in the amount of competition for degrees. Overwhelmingly the people who earn the least will bear most of the cost relatively. That will particularly affect women who are generally lower paid.

“Both Pyne and Tony Abbott suggest we need our universities to improve. Pyne often cites world rankings and suggests we should have more universities in the top 25 or top 50. But why should we? We are a small country, population wise, and even in terms of GDP we are not in the top 10.” University rankings take into account aspects such as “prestige”: no Australian university is ever going to beat the leading US or UK universities on that score.

Seven Australian universities are in the top 100. “Is that really a poor effort”, Jericho asked. “Is that so dire that we require a major overhaul of funding and a massive increase of debt onto students? I might think it is if I had any faith the minister in charge had any understanding of his policy or its implications. But given his performance … no one could think that.”

The big universities, the group of eight, have relentlessly pursued this deregulation in the name of excellence. Professor Young of ANU opined that the downsizing would have a “trickle-down” effect throughout the university sector and lead to more high-achieving students attending regional and suburban universities.

“In a sense, if you’re not a Group of Eight university that should be good news, because what it means is it’s going to free up in the future more capable students for other institutions,” he said. “I think … that will be good for the quality of education we provide and indeed for the quality of research we provide.”

Pyne believes that higher fees do not act as a significant disincentive to prospective students who are less well-off and notes that those with higher degrees will be better off. In other words, in his view, the benefits of universities flow mostly to the individual. Both assumptions are absolutely wrong and are irrelevant to the cuts to research funding and training. Professor Bruce Chapman, designer of the HECS scheme, like others has pointed to the negative social consequences.

The studies in the US such as that by Claudia Goldin and Laurence Katz, of Harvard University (‘Long-Run Changes in the Wage: Structure: Narrowing. Widening. Polarizing’, Brookings Papers on Economic Activity, 2:135-165, 2007) and Timothy Noah (The Great Divergence, Bloomsberry Press, New York, 2012) show categorically that higher college and university fees have contributed significantly to the dramatically widening wealth gap, a point consistently made by Nobel prizewinning economist Joseph Stiglitz. Less well-off students simply cannot afford the fees: those more advantaged who can demand higher wages and salaries. Very significant gains to the community flow from investment in universities through reductions in social service benefits, higher taxes and the flow on of higher order – more skilled – employment generally, as pointed out above. And as to the cuts in research funding the reductions are dangerous, especially when one recalls that there are also cuts to every area of research including CSIRO and the Co-operative Research Centre scheme which matches commercial funding with government funding for research.

Peter McPhee, Professorial Fellow in the Melbourne Graduate School of Education at the University of Melbourne, wrote in Inside Story, “One year into his term of office, it remains unclear whether Christopher Pyne’s agenda will be realised. The stakes are high.

“The Australian higher education sector is a major success story of the past thirty years, despite the long-term withering of public funding: it enjoys a positive approval rating of about 75 per cent in opinion polls; 37 per cent of Australians now have degrees compared with only 3 per cent forty years ago; and the sector does quite strongly in international research rankings, despite signs of a gradual slide. International education is Australia’s fourth-largest export, generating about $14.5 billion in revenue.”

The claims by the Group of Eight Universities were examined by Professor John Quiggin (University of Queensland) in The Conversation of 2 September. Microeconomic reform such as allowing private providers to offer courses leads to scams. This is already happening as poorer migrants are being induced to sign up for courses through offers of cash and free laptop computers and being told they will never have to pay back the fees. (But they will receive government subsidy.)

Competition does not enhance diversity and choice. All providers raise their fees to the highest level they can and the prospective student seldom can gain enough knowledge to intelligently choose between providers. Ability to choose is affected by the asymetry of information availability, a subject on which Nobel prizes have been won. (Competition has been shown by the OECD in its PISA program to be irrelevant in improving school performance .) Quiggin points out that it amplifies inequality in resourcing. (That has been found in applying marketization to schools: existing differences have simply been emphasized.) The same structural reforms are made everywhere because the incentives are the same everywhere!

And as for establishing elite universities with fewer students prepared to pay higher fees, like Harvard and MIT, Quiggin is rightly scathing. “The stratified system in the US reproduces and amplifies an increasingly stagnant social structure. Inherited wealth is the key to success. Not only the Ivy League but the “flagship” state universities (which have followed the path of quasi-privatisation being advocated in Australia) are largely confined to the children of households in the top 20% of income distribution. The resulting loss of social mobility has provoked a crisis in a country that has always seen itself as a “land of opportunity”. (It is not irrelevant to remember that the US is a highly stratified society with a long history of discrimination as demonstrated by voter registration and support for African-American and, more recently, Latino school education, despite the 14 th amendment to the Constitution.)

Like Jericho, Quiggin accuses Minister Pyne of being ill-informed about his own policies and unaware of the history of these policies in Australia and elsewhere. Universities allowed to increase their fees all chose the maximum 25% increase under the Howard Government.

Responding to comments by Adelaide University’s Vice Chancellor Warren Bebbington who claimed the possibility of transforming Australia’s system to one resembling that of the US without the crippling debt, Quiggin pointed out, on his website October 8 2014, that comparisons with the elite universities were nonsense. He concluded, “Pyne (like the Go8) doesn’t have a clue about the model he is pushing. This whole package should be scrapped: If the government wants to make changes, it should do some research first”.

In the last month, the last university system in Germany, in Lower Saxony, abolished university fees: presumably that didn’t happen because there was no interest in universities being of high quality! Student protests over the last 15 years together with citizen petitions and so on in Germany have secured this action. In the UK on the other hand, universities are moving to full privatisation with most  funding now coming from student tuition fees – an amount that is under constant scrutiny from university vice chancellors and which could be increased yet again in the near future. Government maintains that as a signficant policy position. Students have not protested loudly.


In early October the Times Higher Education magazine released its 11th annual World University Rankings.  Australia made big gains with most of Australia’s top universities moving up the rankings. Melbourne University remained Australia’s top-ranked university in 33rd position globally, ahead of the Australian National University (ANU) in Canberra at 45th (up from 48th last year), the University of Sydney at 60th (up from 72nd) and the University of Queensland at 65th position (down from 63rd).

Australia’s university sector was described as a “world-class system”. “The data shows that Australia does not have just a few world-class universities, but a world-class system – in addition to the eight universities which make the world top 200, there are a further 12 universities which make the 200-400 group,” the report stated.

But it also said, “The big question, as Australia moves into a period of radical reform with the full deregulation of tuition fees, is whether this admirable strength-in-depth can be maintained.”

Worldwide, the United States continued to dominate the Times Higher Education rankings, taking seven of the top 10 places and 15 of the top 20. However, this year 60 per cent of US universities lost ground and overall the US suffered an average fall of 5.34 ranking places.

The Times Higher Education World University Rankings are based partly on a survey of about 10,000 academics in 2014, and use 13 performance indicators to rank the world’s top 200 universities, in the fields of research, teaching, knowledge transfer and international activity.