National press club address: spreading opportunity and staying competitive

‘Spreading opportunity and staying competitive – why we need the higher education reform package'

National Press Club, Canberra

6 August 2014

Introduction

In the Federal Budget in May, the Government announced a package of changes to Australia’s higher education system. These changes will spread opportunity for students and ensure Australia will not be left behind by cut-throat international competition and disruptive technologies in higher education.

Through the Government’s reforms, Australia can more than hold our own and create some of the best universities in the world and the best higher education system in the world. The reforms will create a system that increases our nation’s international standing. The reforms will create a system that will provide Australians with the skills and knowledge for the jobs of the future.

We live in a time of inevitable and constant change. The international economy is evolving. The employment market is changing. The citizens and workers of tomorrow will need different skills to those they need today.

Bruno Lanvin, Executive Director of one of the world’s leading and largest graduate business schools, and a former senior executive at the World Bank and the United Nations has said:

…in an environment of ongoing disruptive technologies and economic structural change, we are preparing graduates for jobs that have not even been defined today…

Global competition for higher education is intensifying, there are world-class universities emerging on our door step in Asia.

And new technology is driving the expansion of online education.

We must equip Australia’s higher education institutions to meet the demands of the 21^st century and we have an historic opportunity to do this now.

The choice is stark:

either we spread access to higher education to more Australians and keep our country competitive with others in our region, or

we support a higher education system that is unsustainable, that will decline into mediocrity, and eventually be left behind.

Knowing the challenges we confront, it would be irresponsible, indeed cowardly, as the Minister for Education, not to act. While it might be politically expedient to leave it for someone else, I didn’t spend 21 years in politics scaling the mountain, only to admire the view.

So, I embrace this challenge, and I call on the Senate cross-benchers to join with me in meeting it head on. I know we can work together to create some of the best universities in the world and the best higher education system in the world.

If we adopt the Government’s higher education package, Australian higher education institutions will have the freedom to respond to our changing environment.

Our universities and colleges will be more creative and they will improve the teaching and learning they offer in order to attract students.

Australian students will be able to choose from a wider range of courses. They will have better information to help them choose where and what they will study.

By 2018 there will be an additional 80,000 higher education students per year supported by the Commonwealth. These new students will include more Australians from disadvantaged backgrounds, more students from rural and regional Australia, Australians who require more support to succeed at university and workers whose skills and jobs are becoming outdated and need to be updated.

We need this package to spread opportunity to all these Australians. We need it now.

Current situation

Both sides of politics agree Australia’s current higher education and research system is unsustainable. Apart from the landmark reform of the demand-driven system, the previous Labor Government tried to deal with this by just making cuts. They made no attempt to bolster revenue to universities in spite of knowing that more revenue was needed. In fact, under their watch the international education market is estimated to have fallen from $19 billion in 2009-10 to $15 billion when they left office.

By contrast this government wants to strengthen our higher education system and make it more sustainable in the long term.

The uncapping of Commonwealth supported places initiated under Labor allowed more students to study at university. This is very desirable, and we are maintaining this. However the demand-driven system led to rapidly increasing costs for the taxpayer.

I agree with former Prime Minister Paul Keating who said:

there is no such thing….as “free” education, somebody has to pay. In systems with no charges those somebodies are all taxpayers. This is a pretty important point: a “free” higher education system is one paid for by the taxes of all, the majority of whom haven't had the privilege of a university education. Ask yourself if you think that is a fair thing.

This government believes the higher education system must be fair and equitable for all Australians. Those who benefit most – the students themselves – must make a fair contribution, given the ongoing benefits they receive from higher education over their lifetime. But I firmly believe that they should not pay until they are earning a decent living.

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 foregone university.

University graduates are consistently and significantly less likely to be unemployed than those people without degrees.

And university graduates also live longer and enjoy better health.

Under our package, we expect higher education graduates will be required to contribute around 50 per cent on average to the cost of their higher education. Currently students contribute only around 40 per cent on average while the taxpayer pays 60 per cent.

Ask yourself if this is fair when they are benefiting more than those who are paying the bulk of the cost.

Under our package public funding for education will continue to grow. Total education and research funding in my portfolio will continue to grow by around $5.7 billion over the next four years.

This includes higher education and research funding that will grow by over $950 million over the same period.

We believe students undertaking a wider range of courses deserve support from the Australian Government. Currently only students studying bachelor level courses at universities are guaranteed to have their place directly supported by the Australian Government.

This means there is currently limited support for students who chose to study for higher education qualifications at TAFEs, private universities, and private higher education institutions and for students studying higher education diplomas, advanced diplomas and associate degrees.

These are the qualifications that lead to jobs such as childcare workers, aged care workers and computer technicians. With our changing economy and ageing population, why don’t we support the students who will do these vital jobs?

They are also qualifications that serve as pathways into university, preparing students for university study. Many of these students come from low socio-economic status backgrounds, and many are first generation university students.

Such pathways have been proven to be very effective in equipping students for university. Often they perform better at university than students with better Year 12 results who have not come through pathway programmes.

Our expectation is that guaranteed support for such pathway qualifications will help to improve the success rate and reduce the drop-out rate for undergraduates.

In a world of growing international competition, Universities Australia has warned us about the risk of Australia being left behind.

Currently our universities have limited prospects of competing with the best in Europe and North America and the fast developing universities of Asia.

Five years ago there were no Chinese universities in the top 200 universities in the Shanghai Jiao Tong index of universities. Today there are five. In the same period only one Australian university has entered the top 200, joining six Australian universities already there. We face the prospect of our universities falling behind, or we can do something about it.

We believe Australia must keep attracting the world’s best and brightest to study here. International students who come to Australia bring different views and cultures that enhance our knowledge and skills. Importantly, international education is a valuable export. As I mentioned earlier, we earn around $15 billion by providing education to international students each year. It is our third largest export after iron ore and coal, and our largest non-resource export.

Unless we give universities and higher education colleges more freedom, we are asking them to operate in the modern world economy with one hand tied behind their back.

In early June, higher education commentator Stephen Matchett said:

after [universities] complaining about underfunding and government interference for decades there is now a chance of change. Australian universities are governed by rules from the 1980s, designed…to make all 39 institutions as similar as possible. What worked then does not work in the age of the internet, with competition from across the country and the world.

Our package also shores up critical research programmes left unfunded by the previous Labor Government. Without our higher education package there is no solution to these funding cliffs and Australia’s researchers will languish.

Views on the package

Our reforms are a coherent package that will bring Australia’s higher education system into the 21st century.

As the economist Professor Judith Sloan said a few weeks ago, there are quite a few moving parts to the higher education package…..the sum of these moving parts will produce a degree of coherence that has been largely absent from higher education policy for some time.

As is clear from comments by Belinda Robinson of Universities Australia, university leaders generally agree with the Government that we need to deregulate or free-up higher education in Australia.

In early July, Australian Technology Network (ATN) Executive Director Vicki Thomson explained that the ATN supports deregulation. She said:

..it’s about more than just financial savings, it’s also about driving diversity and giving students unparalleled choice.

Ms Thomson advised independent Senators that:

to reject the [deregulation] legislation out of hand … would be to sign the death warrant on a globally respected higher education system.

Regional Universities Network Chair, Professor Peter Lee, said:

universities may no longer be complacent about teaching performance, but we’re probably not as smart and creative in challenging modern, technologically-savvy students as we should be. To that extent, the deregulation reforms should play a critical role in making universities look closely at what we teach and how we teach it, and that can only be a good thing.

Professor John Dewar, Vice Chancellor of La Trobe University, said prior to the Budget:

the reality is that something has to give if universities are to serve the national interest effectively…A deregulation of fee setting is an obvious next step

In this Press Club a week ago, the Vice-Chancellor of the Australian National University, Professor Ian Young, said that it would be a ‘tragedy’ if the deregulation were not passed, leading our universities inevitably into ‘decay’.

And Michael Gallagher, Chief Executive of the Group of Eight Universities, said:

the 2014 Higher Education Budget reforms are necessary. They are logical, coherent, sustainable, equitable and inevitable.

Mr Gallagher went on to say:

my guess is that the detractors of micro-economic reform in Australia's higher education industry will find themselves on the wrong side of history in resisting efficiency improvement and innovation…….

[they will be] curiously, supporting socially regressive subsidies from general taxpayers to more advantaged segments of the community.

All of these different commentators are in general agreement that we cannot stand by and do nothing.

There is an emerging consensus.

This is the right time for reform – the world is changing fast, and we need to respond now.

We need to free our universities to meet the challenges of the 21^st century – above all, to meet the needs of our students and future graduates in a rapidly changing world.

Australia’s higher education system being left unchanged will mean that our students receive a mediocre education that allows them to think they can compete with the world’s best, only to find when they turn up to the competition they consistently come 8^th out of eight and never mount the winner’s platform.

Spreading opportunities for students

Contrary to the breathless excitement of the National Tertiary Education Union and the Socialist Alternative, students are the big winners from the Government’s higher education package.

As I said earlier, 80,000 more students each year will be able to study the course of their choice and at the institution of their choice with Commonwealth support.

Regional students and regional higher education institutions have the potential to benefit significantly.

Recently I travelled from Mackay to Townsville to Lismore, Dubbo, Wagga and Mildura. Everywhere I went, people in regional Australia told me that they want access to the same opportunities that their city counterparts enjoy.

The reforms will encourage innovative partnerships, especially in outer‑metropolitan and regional areas where universities and TAFEs can work together to offer the skills and knowledge that local employers want in their employees.

The Government’s package will free regional universities to respond more flexibly to the needs of their potential students – to make studying at a regional university highly attractive. These universities can offer a different lifestyle, lower living costs, high quality courses, strong student satisfaction, good employment outcomes, and potentially better value for money.

Professor Jim Barber, former Vice Chancellor of the University of New England, said, ..we are likely to see prices move in both directions following deregulation and the prestigious university brands will find themselves going head-to-head with a raft of cheaper but equally high-quality competitors.

Commonwealth Scholarships

Under the Government’s reforms, students from disadvantaged backgrounds including from regional Australia will have access to the new Commonwealth Scholarship scheme. Their higher education institution will help them with their costs of living while they study. The scholarships will also be able to cover fee exemptions and mentoring, tutorial support and even relocation and living expenses.

Higher education institutions will be required to allocate one dollar in every five dollars of additional revenue they raise from student contributions to this new scheme. With this investment, institutions will tailor individual packages to meet the needs of their students, their consumers.

These new arrangements will mean our smartest students can receive a world-class education no matter what their background might be or where they are from.

Higher Education Loan Programme (HELP)

Students in Australia do not face upfront costs and do not repay their contribution to the cost of their higher education until they are earning a decent income. That world-class system of support will stay. And we will make it even more generous.

Students will benefit from removing the loan fees that apply when students borrow to study under the VET FEE-HELP and FEE-HELP schemes. This will mean a level playing field for students, no matter where they choose to study.

Equipping universities for change

The Government’s package will give higher education institutions the freedom to work to their strengths. We will give universities the opportunity to respond to the changing economic and social environment in which they operate.

Higher education institutions will be able to make informed choices about what courses they offer, what fees they charge, which students they aim to attract, what teaching methods they use, what scholarships they provide and what other support services they give.

Conor King, Executive Director of the Innovative Research Universities said shortly after the higher education Budget package was announced: The challenge for universities…is to engage with the potential of the new, not work out ways to operate as if nothing were changing.

University of Wollongong Vice Chancellor Professor Paul Wellings said, [the new arrangements will give]each university a chance to control the level of funding per student and to have greater ability to tune its own strategic direction independently of the government. After all those years when the sector was controlled by volume … and price … we should be celebrating the chance to do [something] different.

Each institution will have the freedom to position themselves to provide the very best education to the students they wish to teach.

One university may want to provide intensive tutorials to a small number of students with the world’s best thinkers and teachers in their field. Another university may wish to provide innovative online courses catering for students who wish to study in flexible ways. Others may cater to parents or workers who want to change jobs because they are working in industries that are contracting.

Students will be able to choose the kind of degree they want.

As Paul Wellings went on to say, universities should anticipate changing behaviours from undergraduate students who will want to see greater engagement…. Universities will need to re-examine the quality of information we give prospective students and be even more responsive to student needs and their graduate destinations.

Many higher education institutions are thinking with dynamism and strategic vision about exciting things they can achieve as a result of the reforms.

Since the Budget announcement many university leaders have thought more than ever before about how they are going to make what they offer students more appealing to them.

Such leaders are planning for the future and thinking about the package they will offer, including courses, student support, scholarships, and the value they will offer to students.

Vice-chancellor of Central Queensland University Scott Bowman said, there are two types of universities: those that see change, wring their hands and say ‘Oh woe is me'. And then there are others that lick their lips. We are licking our lips, he said, because we are a lip-smackingly good university.

When competition increases, the winners are students.

Driving quality through competition and better information

A competitive market requires an informed consumer. We are responding to this truism.

New information provided through the Quality Indicators for Learning and Teaching will put the performance of each higher education institution, private as well as public, in the public eye.

Students and their families will be able to access information about the quality of courses and institutions they are considering. There will be better information about how successful previous graduates have been at finding jobs and what other students and employers think of the course.

This information will also help Australian institutions to compare their performance with other countries, helping them to learn how to continually improve.

A new website presenting this and other information will be online later this year with full implementation by August 2015.

Course fees

I believe universities will be very responsible in setting their fees under the new higher education arrangements.

There has been a lot of misinformation and outrageous predictions about exorbitant fees. There has also been some considered analysis. An impressive example of considered analysis is the modelling by the Innovative Research Universities that identifies four options for institutions to keep their price changes to a minimum.

Under one of the Innovative Research Universities’ scenarios all degrees in a university in 2016 would be charged at the same rate – with all students, regardless of what they are studying, paying just under $10,400 each.

A further scenario allows for different prices for different degrees. The majority would pay close to $8,000, and a small number in more expensive degrees like law, dentistry, medicine and veterinary science – where the lifetime earnings of graduates are very high – would pay $13,300.

Conor King has said:

universities could easily spread the increases across all disciplines and limit the cost increases to students.

Professor Ian Young, Vice Chancellor at the Australian National University, said, based on his calculations a three year degree may increase from $40,000 to $50,000.

These are not the stratospheric numbers the opposition are maliciously trumpeting to scare Australians away from higher education.

Higher education will typically be the best investment a person will ever make in their own future. It is crucial that no one is deterred from this life-changing opportunity through exaggerated and misleading scare campaigns.

The Opposition is irresponsible, ill-informed and dyspeptic. As Belinda Robinson of Universities Australia has said, ‘It seems a bit rich to be blocking these reforms when there is no alternative’. Just because Labor cannot accept reality doesn’t mean we shouldn’t effect reform. And we will.

Research

A key element of the Government’s higher education package is its commitment to maintaining Australia’s research standing.

The Government faced two funding cliffs in research – two crucial areas in which the previous Government left no provision for future expenditure. We have provided hundreds of millions of dollars for research infrastructure and mid-career research fellowships that the previous Government left unfunded and that can only be funded through our package.

First, the Government has committed $139 million for the Future Fellowships scheme, awarding 100 four-year fellowships each year from 2015 through the Australian Research Council (ARC).

A couple of weeks ago I announced 150 fellowships awarded to outstanding researchers. These researchers are working on a broad range of research that will deliver benefits to our nation and our region. This includes improving Australian agriculture, food security and preventing future water scarcity.

Secondly, the Government has also committed to provide $150 million in 2015-16 to continue the National Collaborative Research Infrastructure Strategy. This will ensure that we secure the benefits of the $2.5 billion investment in state-of-the-art research infrastructure since the Strategy was created by the Howard Government in 2004.

Ongoing development of our research agenda will be informed by the views of the university and research sectors, input from industry bodies and important reviews such as the National Commission of Audit.

The Commission found that ‘quality research infrastructure is a critical component of Australia’s research and development system.’ It also recommended that the Government commit to ‘ongoing funding for critical research infrastructure in Australia, informed by a reassessment of existing research infrastructure provision and requirements’.

In line with this constructive approach, a positive review of research infrastructure will commence in the coming months.

Implementation

These reforms will transform opportunities for Australians, particularly young Australians to get the quality higher education in Australia that they deserve.

In developing a plan to implement the reforms, we are listening to the views being expressed across Australia. The move to a new higher education system is being carefully planned.

I am working closely with and listening to higher education and research stakeholders on the details of the reforms and the process for implementation.

The Legislation and Financing Working Group chaired by John Dewar has advised me on various important components of the higher education package such as the funding for non-university higher education institutions and sub-bachelor courses.

And the Quality, Deregulation and Information Working Group, chaired by University of Western Sydney Chancellor Peter Shergold, has advised on how to implement the changes while minimising unnecessary red tape.

I am considering their constructive and thoughtful advice in developing legislation for the higher education package. I expect to introduce this legislation into Parliament this month.

Naturally, I understand that the single biggest issue raised by university leaders is the interest rate on student debts under the Higher Education Loan Programme. At present, there is a hidden subsidy from the taxpayer to students when the Government borrows at the bond rate to lend to students whose debts are only indexed at the Consumer Price Index. We have proposed that students should pay in effect the interest rate that the Government has had to pay to lend to them. We believe that this is both fair and important for a fiscally sustainable Higher Education Loan Programme.

I have been consulting with universities and others, including through the Dewar group, on their concerns about this measure and about alternative proposals. Naturally, I will give careful thought to all that has been said in this constructive dialogue.

Conclusion

It is now up to the Parliament to make this historic opportunity a reality.

The Government’s higher education reform package is essential for the future prosperity of our nation.

If we implement this package we will have more highly qualified people across a wider range of fields; and these graduates will come from more diverse backgrounds.

Through this package we will have a strong competitive research system; and we have the potential to have some of the best universities in the world in what can become the best higher education system in the world.

The alternative is not acceptable. If we do not take this opportunity to transform higher education we will retain an unsustainable, outdated system. We risk that system declining into mediocrity and Australia being left behind.

We will truly be on the wrong side of history if we don’t make change for the better and if we don't make that change now.