Responding to the 2014-2015 Federal Budget

Friday, 23 May 2014

Each year, the month of May brings with it a set of expectations. The evenings will turn cooler as autumn sets in; the university year will move into a higher gear of assessments, marking and examinations; and like clockwork, the political cycle will deliver a Federal Budget on the second Tuesday of the month.

After the initial budget commentary and analysis, we then expect to move on with our core business.  Not this year. The Federal Budget announcement on 13 May represented a seismic event for Australia’s higher education system – and what constitutes ‘core business’ for universities after 13 May has changed, perhaps irrevocably.

Cost-shifting and cuts

Firstly, from 2016 the Commonwealth contribution to the costs of student places will be on average 20% lower than at present, with the shortfall shifted to students who will pay on average around 20% more. Importantly, however, the increases in student contributions will not be distributed evenly across disciplines, with some students set to see their contributions rise significantly – some by more than 100%. This cost shifting occurs against the backdrop of the application of the 1.25%  decrease in Commonwealth funding rates in 2015 (the ‘efficiency dividend’), on top of this year’s 2% decrease - and a projected lower indexation rate of government funding to universities to cover rising costs of staff salaries and infrastructure.

Fee deregulation

To mitigate against the impact of these funding challenges the government has flagged that ‘full fee’ deregulation will be introduced from 2016. This means that for the first time universities can charge domestic undergraduate students up to - but no higher than - international student fees for the same program. The stated intent of this measure is that allowing universities to set their own course fees will support their financial sustainability and that fee differentiation between universities will  in turn allow students to understand the different ‘value propositions’ offered by different universities.

As an equity measure, the Government will require that any university charging fees above current levels must put 20% of all funds raised in excess of current levels into an equity fund. In a mechanism that reflects pre-Budget recommendations made by the Group of Eight universities, each university will manage its own equity fund intended to be for scholarships and bursaries for disadvantaged students.  Based on track record to date, I am not certain that the Group of Eight is best placed to make recommendations on the equity and access policy for Australia and it is my view that leaving the allocation of such funding open to interpretation by individual institutions of what constitutes the best use of such funding may not be optimal.

Deregulation of providers

The Budget announcement also signalled not only deregulation of ‘price’ but also a deregulation of ‘providers’. The government has extended access to public subsidies for courses at the sub-bachelor (diploma, advanced diploma, associate degree) and bachelor level, while at the same time opening the door to public funding for non university higher education providers.  This will – as intended – increase competition, as some students may decide price is indeed a barrier to enrolling in a university degree and opt to pay lower prices for degrees offered by non-universities.

Tough times for research

While these are the headline issues in the current Budget – that is ‘not all’, as they say. The Budget contained some tough news for PhD students, the Australian Research Council, Cooperative Research Centres, CSIRO, and a number of programs which foster industry related research and innovation. While a proposal to set up a $20bn fund for medical and health research may have appeared to be a ‘light on the hill’, it has divided commentators and the Australian public given the impact of a range of Budget measures – including the proposed $7 GP co-payments – on low income families.

So this May we are embarking on a bold - some might say uncontrolled - experiment which will test the impact of deregulation in all its forms on the access of Australians from all backgrounds to a university education, the capacity of Australian universities to engage with industry and businesses to contribute to an innovation led economy, and the international reputation of the Australian higher education system for excellence in education, research and innovation.

There will be discussions across our University in the months ahead as we begin to understand the ‘devil in the detail’ and shape our responses to the new policy environment.  We will not lose sight of our 2025 Vision – nor, importantly, of our core values – and we will build on the remarkable work that has been carried out across the institution on the NeW Directions Strategic Plan which places us well for a world in which a clear value proposition, differentiation of mission and strong business intelligence capacity is required.  While we may have moved from the expected to the unexpected, chance, as always, favours the prepared.

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