Australia Needs Deregulation

University funding is in a crisis. The current model has put the tertiary sector in a downward spiral of increasing enrolments, decreasing services and cutting staff and other services. After spending $300 billion dollars more than they had, and six years in office, the fFederal Labor Government actually cut university funding by half a billion dollars. With the sole exception of deregulating the number of Commonwealth Supported Places, two governments had made no attempt to deal with the worsening problem of our underfunded universities.

The uncapping of places opened up new revenue to universities, but was accompanied by no additional funding. This combination has contributed to declining quality in the provision of services. Larger classes, fewer tutorials, and more automated course administration.

We are heading into a knowledge economy. Primary industries are slowing in growth, and even if they weren’t they employ relatively few people. Australia needs strong universities to stay competitive internationally. To keep Australians ahead of the game, and to attract the best and brightest to our shores.

Our universities, and in particular our elite universities, are however sliding down the rankings. Laura Wey and the Socialist Alternative might have you believe it is the fault of the Coalition’s policy. This is an anachronism. The reality is the current system was failing before the Coalition’s win., It is failing now and will continue to fail if nothing is changed about the way universities are funded., tThis goes beyond parties, but not beyond politics.

Labor has not come out in particularly vocal opposition to the changes proposed in the budget. This isn’t just to avoid appearing the hypocrite. The reasons are fiscal and electoral, and apply to both sides of politics. There is no advantage to be gained from funding universities. Universities tend to be in safe seats, think New England, Fraser, Farrer, Sydney, and Grayndler. Students, university administrators and academics tend to live around univertsities and therefore tend to live in safe seats. Students, university administrators and academics, often union members (even if involuntarily), aren’t perceived as swing voters. Even if this is not the case, there is little evidence to suggest otherwise.

Fiscally, there is an opportunity cost to funding universities. That cost is primary and secondary education. Why fund universities, when you can fund schools? Every survey of voters finds, time and time again, that they care about two things more than anything, health and education. When they say education, they don’t mean universities. Remember that 60% of Australians have never attended university. Many voters even resent universities, and consider them to be elitist. Broadly, universities are not a popular institution especially in battleground zones like Western Sydney.

The Labor party could not justify spending money on universities while burying the federal government in unprecedented levels of debt. It stands the reason that future Labor governments won’t either, no matter how responsible or irresponsible they are.

University revenue should not be compromised by politics, and it is vital for our universities. Revenue is strongly correlated with international ranking, more money predicts a higher rank. There are other predictors, such as location and historical prestige, but revenue is by far the biggest. Rankings alone are not that important, but rank indicates a high research output, highly qualified staff and a well-resourced university sector. It gives graduates of highly ranked institutions more opportunities and attracts the best people from all around the world to the cities where these institutions are located. This is good for Australia and it is good for students, even if in the end they need to pay more.

The Coalition’s reform package comes in two parts, fee deregulation and HECS reform. HECS reform is a budget policy and an education policy. It does not include fee deregulation per se, but includes important measures for the tertiary sector. The biggest function of HECS is that it takes the risk out of investing in education. The threshold ($53,000 per year) is well above the median wage of $37,000 per year. A student whose degree fails to benefit him/her does not have to pay a cent, unlike in the US.

The package will extend HECS to private universities and non-university education providers, diversifying choice for young Australians. To deal with the increased burden of HECS, the government’s package includes a provision for setting interest on these loans to the ten year bond rate, the rate at which the government borrows money to pay for tuition on the students behalf. With another provision capping this at 6%, whatever that bond rate may be. The current ten year bond rate is 3.44% pa.

Whatever you think of HECS reform, the most important part of this package for Australia’s future is fee deregulation. The reason Labor has not been vocal in its opposition of this package is that both they and the Coalition realise the predicament Australia is in. We cannot have a university system whose survival is so tied up in three year election cycle politics. Fee deregulation allows the major parties to completely dodge the issue of university funding without any electoral cost. It will of course agitate a section of the population, but if we recall the geography of this section precludes them from significantly affecting election outcomes.

With this framework in mind, fee deregulation is inevitable. If it is blocked in the senate, it will be brought up again and again. If the coalition doesn’t pass it, Labor will most certainly have a change of heart when our university sector crumbles and they can’t manage their books. Delaying the reform is not in Australia’s long term interests. That is unless we want to walk into the latter half of the 21st century poorly equipped for a knowledge economy, with a decaying husk of primary industry still the workhorse of the economy.

The author is directly affiliated with The Liberal Party of Australia, however the Author’s views are not necessarily representative of the views of The Liberal Party of Australia or its members.