Address to the Australia-Israel Chamber of Commerce luncheon

Adelaide, Australia-Israel Chamber of Commerce 19 May

Address to the Australia-Israel Chamber of Commerce luncheon in Adelaide

 

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It's great to be here, and my hardworking colleague Matt Williams is also here, the Federal Member for Hindmarsh - elected seven months ago.

Seen quite a lot of the former legal partners and others who I've been involved with over the years.

It's a real home crowd.

The first time I ever addressed the Australia-Israel Chamber of Commerce here in Adelaide in 1994, just after I returned from Israel for the first time - I went with the Australian Union of Jewish Students.

And - I was a Member of Parliament though, and there were 14 people at this - almost inaugural Australia-Israel Chamber of Commerce event, and two of them are here today too, after all these years.

Nice to see that there's the continuing support from those 14, and I'm very pleased to be here to talk about the Federal Government's Budget.

I am very lucky to be the Minister for Education who will be delivering the biggest reform of higher education in 30 years to Australia.

It is a vitally important reform, and is the centrepiece of the Commonwealth's Budget in terms of a proactive, transformative change to the Australian economy and education sector for the future lives of hundreds of thousands of Australians.

Because when I came to government seven or eight months ago, it was immediately apparent that we could either preside over the slow decline of the higher education sector - as previous governments have presided over the decline of the manufacturing sector in Australia, or we could - given that the Budget is tight and is requiring constraints, we could - rather than tinker here or tinker there, we could make a dramatic change to higher education that would be reformist and transformative, and kept the higher education sector up for decades into the future to compete with competitive nations, particularly Chinese and other Asian universities.

So the reform takes two elements.

The first element is to spread opportunity to more students, more young people, to go to university and then get that opportunity to earn 75 per cent more over their lifetimes than people who don't go to uni, and also to enjoy an unemployment rate of less than three per cent, rather than the - about five and a half per cent for the rest of the economy right now.

And the second aspect of the reform is to allow the universities the freedom to compete with each other and internationally.

And that means a [indistinct] rejection of two things, more revenue and also competition, which is an adrenaline shock to determine the quality and meeting what the market wants and they're prepared to pay for.

So we're doing this in a number of ways.

The first way is that we are opening up the higher education sector to competition from non-university higher education providers.

There are about 40 universities and there are a couple of hundred high quality higher education providers, of that there are probably about 60 very high quality non-university higher education providers.

And for the first time ever, those non-university higher education institutions will be able to access the Commonwealth Grant Scheme.

So they will be able to get a subsidy from the Commonwealth Government for every one of their students in an accredited course at an accredited institution.

This will have the impact, of course, of more students being able to access higher education - whether it's at a non-university or a university, but also will make the universities have to compete with non-university higher education providers for that Commonwealth Grant Scheme funds, for the consumer's dollar - which is the student.

And that will lead to higher quality and offering students what they need and want, and providing a service that they are prepared to pay for, to value.

The second thing we're doing is - I asked Andrew Norton and David Kemp to do a review of the demand driven system, and most of you here are from the higher education or education system, I won't explain both of these terms.

But the valuing system was the lifting of the cap of places for undergraduate degrees, and allowing them - the universities to enrol as many students as they wanted to.

On the other side of that market, of course, there was no price signals, and that operated for a few years.

And I asked David Kemp and Andrew Norton to review the demand driven system was providing the skill that the economy needs, and also whether it was leading to a reduction of quality.

Their report came back and said it hadn't produced quality and that it wasn't meeting the skills required for the economy, and in fact it should be expanded.

So in the Budget, I managed to get the Treasurer and the Prime Minister to agree to actually expand the demand-driven system across to sub-bachelor degrees, diplomas, associate degrees, and degrees, so that more young people who were doing those sub-bachelor places would be able to access it.

This is a very important equity measure.

Not only will it lead to about 80,000 more students going to university, these courses are typically done by first generation university goers, from low socio-economic Australian backgrounds, who if they were going straight into an undergraduate degree, it was found that about 24 per cent were dropping out in the first year.

But if they did a sub-bachelor course, they didn't drop out, because they were given the preparation necessary to then take on and successfully pass an undergraduate degree.

So a place like the University of Western Sydney, for example, would benefit enormously from this expansion of the demand-driven system.

Because many of their student cohorts are first-generation university goers.

So this is a very important part of the opportunity aspect of this economic reform, because we're spreading the opportunity to go to university to many more Australians.

And also at the same time expanding competition to the non-university higher education providers.

The universities aren't the only institutions, of course, offering these sub-bachelor courses.

So do a lot of the training - some of the TAFEs, for example, and other training institutions that are of high quality, they'll also be able to access both the Commonwealth Grant Scheme now, and the demand-driven system for sub-bachelor degrees.

So I think those two measures on their own will be very transformative, and they're costing us a lot of money.

What else are we doing?

We are, of course, deregulating the fees that universities can charge and choose to do so.

So for the first time, we are allowing universities to put a value on the courses that they offer students.

Some courses will see the fees rise, other courses will see the fees fall.

Universities in regional and rural Australia, for example, that have a large preponderance of these sub-bachelor courses, they'll benefit from that.

They'll also benefit from being able to compete for the first time on price with other universities.

The Go8 universities will probably value their courses more highly, and they'll therefore face competition from other institutions, both private providers and other universities who will say: well if Melbourne University is going to charge X, we will charge Y, and for the first time ever be able to compete with other universities.

At the moment, as you would know, it doesn't matter whether you go to Melbourne University or whether you go to Deakin University, you pay exactly the same amount.

And both of those institutions receive exactly the same amount from both the student and the government.

And that is not a fair valuing of the courses that are available in our university system.

And we know this is - that universities can do this successfully, because the international education market has flourished for well over a decade - almost a couple of decades to the extent where international education has become our fourth-largest export industry, after iron or coal and gold.

So it's the biggest industry after mining, if you aggregate the three of them together.

So we know that our universities know how to do this, because they've been doing this for some time and they've been very successful.

We have an enormous international education cohort coming into Australia, because they value the courses that they've been offered.

They like the fact that they're in a similar time zone, they feel safe in Australia, they want to come here.

So we know that our universities being asked to now value their courses for the vested students can see immediately the courses that'll attract a higher price and attract students.

So this will lead to universities pursuing what they're good at, rather than offering every single course that they now offer, they will say: what are the things that we're best at here at Adelaide University?

Or the University of South Australia or Flinders University.

So the excellence of our universities will improve.

And this is effectively the only way that we will allow our universities to compete with their competitor universities overseas.

Because if they want more revenue, that revenue cannot come from the Government, because the Australian taxpayer doesn't have any more money to give.

So we either allow our universities to not get the revenue they need to achieve excellence, or we say students need to contribute more to give our universities the opportunity to be the best in the world.

Five years ago, there were no Chinese universities to have top 200 in the world. No Chinese universities at all.

Today, there are five Chinese universities in the top 200 in the world. There are six Australian universities.

And one of the - Australia, the UK, and the US had the most universities in the top 200 in the world.

It won't be long before China is the third and Australia is the fourth.

And how long will be, then, before we're in the fifth and somebody else is in the fourth?

So, we have to give our best universities the chance to compete, and that is one of the big parts of our reform.

And I believe students can contribute more.

People who go to university have a - will earn 75 per cent more than those people who don't.

Typically, they will earn more than a million dollars more than those people who don't go to university.

Students are currently contributing about 42 per cent of the cost of their education to get that extraordinary personal benefit and the taxpayer is contributing the other almost 60 per cent.

And yet, less than 40 per cent of Australians have a university degree.

So, we're simply asking those students who will get extraordinary personal benefit to make it a 50/50 contribution to the cost of their education and are still asking the more than 60 per cent of the population who don't have a university degree to subsidise that education so that others can earn more than them.

I think that is a very reasonable deal and in Australia, that requires every single dollar to the Australian Government.

So, our HECS debt at the moment is about $52 billion.

That's how much the taxpayer has led to students to go to university.

That we continue to borrow every single dollar from Australian taxpayer and start paying it back when they have earned more than $50,000 a year, and they start paying it back at the rate of two per cent of their income.

So, that is the best loan that the students will ever receive in their lifetime.

It is a very generous system; it's the envy of the world and others have tried to emulate it.

Eighteen per cent of students HECS debt will never pay - never pay back the taxpayer for the extraordinary personal benefit that they have received, and the largest number of those are living in the UK and earning incomes far in excess of $50,000 a year.

So there's a very small piece in the newspaper today about how the Education Minister in Britain and I have established an education dialogue, and the number one item on the agenda is a tax treaty with the British that will allow us to get that money back from those lovely Australians who live in the UK and don’t pay their HECS debt.

And so that now there are British students who live in Australia don't pay their [indistinct] back to the British.

So that will be multiplying over a long period of time.

But also, with that extra revenue that the universities will receive, we're going to ask them to put one in five dollars into a Commonwealth scholarships fund so that anything that they gain in excess of the current Commonwealth Grant Scheme, the money, and the student contribution, which we'll be able to work out.

And we're going to ask them to put that into a Commonwealth Scholarship Scheme - the biggest Commonwealth Scholarship Scheme in Australia's history - and that will be given to students who are bright and from disadvantaged backgrounds.

So, the smartest kid from whatever background can go to the best university in Australia effectively for the first time and on en mass.

That was another big part of our equity aspect to this Budget - another reason why I'm very pleased to be the Minister implementing this.

So, we're allowing competition, we're expanding opportunity, and we're making universities - who are very pleased to do so, I should add - have a Commonwealth Scholarship Scheme so that the people from low SES backgrounds or other disadvantaged have the opportunity to go to university either for nothing, or be paid a bursary, or to have living expenses incorporated into their scholarship, and this will particularly help rural and regional students.

The biggest [indistinct] in many of those going to university is of course being able to afford to move to the city or to live in the town, and they'll be able to - if they win a scholarship from their university, then they'll be able to do that with bursaries or other main scholarship [indistinct].

And we're also - because the consumer have to have the information to be able to make the market work - establishing a quality indicator of learning and teaching for them, which was one of the recommendations of the O'Connor Committee into how the university information should be provided.

This will be a mixture of surveys and other market information so that students will be able to visit this website, call them whatever you call it, and get very high quality information.

This will be quite expensive.

I can't tell you how much as it will be a public tender, but it will be quite expensive, because the information has to be very high quality if the market is going to work.

So that students can see how many people from a particular course they're interested in got a job, how long it took them to get a job, what their debt was when they started paying it back, how much time they had during the year to work as well as to study, the quality of the teaching, the quality of the research.

So, we are picking up each aspect of what is required to make sure that the consumer can make an informed choice about how they want to spend their dollar and the degree that they wish to pursue.

All this is costing us $900 billion more over the next four years than was previously budgeted.

So, there's absolutely no cuts to higher education in Australia because its actually costing us almost a billion dollars to do all this.

And why are we doing it?

Because we believe it will lead to a transformation in skills in Australia in our university sector, and the reliance on the sector on Government.

Because they will themselves find ways to fund their research, encourage philanthropy, teach their courses best.

Some institutions will become more teaching-focused; some will become more research-focused; and that's exactly the way it should be, because the one-size-fits-all approach to universities which was the central element of the Dawkins reforms, is then replaced by [indistinct] opportunity and encourage excellence.

We're doing this also because we have to undo a lot of the Labor Party's legacy in higher education.

International education has fallen from a $19 billion industry when we left government to a $15 billion industry, having a very important impact, of course, on the revenues of universities, but also on the revenues to the Commonwealth Government.

We were falling in our rankings.

Every new ranking in the last few years, most of our institutions have dropped down the rankings.

Many have disappeared out of the top 100 in the world, and that would continue without dramatic change.

Universities were seeing shrinking revenues but increased expectations.

These reforms will require the university to sit down with the National Tertiary Education Union and have a genuine discussion about enterprise bargaining agreements in the future of how they are going to receive their salaries and emoluments.

And the Labor Party - they've got the number of research funding clipped.

Their national collaborative research infrastructure scheme was coming to an end without continuing funding, but I've managed to secure funding for NCRIS so that it can continue.

The Future Fellowships Program for our mid-year, mid-career research was coming to an end - another funding clip, and I've managed to secure funding for the Future Fellowships into the future so that our researchers don't need to leave Australia to be able to reach their full potential and they'll continue to be supported by the Government.

So, as you can see, we have a whole approach to this - to the university sector.

It's not a piecemeal approach.

It has a philosophy behind it, and I believe it will lead to a better sector, a higher quality sector, a sector that's properly resourced and funded into the future, and with more students who'll have the opportunity to go to university than would otherwise have been the case without reform.

Thank you very much.

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