University of Melbourne submission to

Driving Innovation, Fairness and Excellence in Australian Higher Education

JULY 2016

TheUniversityofMelbourneispleasedtomakearesponseto the Commonwealth’s DrivingInnovation,FairnessandExcellenceinAustralianHigherEducation options paper.

TheUniversityofMelbourneisaworld-classresearch-intensiveuniversity,whichhasmorethan50,000students,7,400staff,over338,000alumniinternationallyandanannualbudgetexceeding$2billion. In2014theUniversity’sexpenditureonresearchwas$1.1billion. It is a significant contributor to Australia’s higher education industry, which is critical to the economic, social and cultural development of Australia and its competitiveness within the global knowledge economy. We believe universities are best placed to strengthen this contribution if, in the words of Minister Birmingham to the Universities’ Australia conference in March this year, they are “free to chart their own course, pursue their strengths and serve their communities.”

The University also supports the statement (contained in the options paper)that higher education policy settings must “drive innovation and areas of specialisation across our universities; embed fairness and equitable access to university for all Australians; ensure global excellence amongst our universities; and are financially sustainable and affordable into the long term.”

Based on this shared understanding of desired outcomes, this submission makes recommendations for priority reforms that could deliver a more sustainable and flexible approach to funding higher education.

For further information or to discuss this submission, contact Dr Julie Wells, Vice-Principal Policy and Projects, E: , T: +61 3 8344 2639.

Summaryofrecommendations

  • Reshapethedemanddrivensystem to support quality graduate outcomes and alignment with employment needs and institutional mission. Such reshaping should incorporate theinclusion ofpostgraduatecourseworkandsub-bachelordegrees, thereby recognising the importance of diversity within higher education delivery, and a renewed focus on flexibility within institutional funding agreements.
  • Ensure that any change to the balance between public and private contributions is informed by an analysis of the impact on students and on the capacity of universities to undertake quality teaching and research. This should be supported by greatertransparencyintheresourcingofteachingandeducationthrough development ofanagreedresourcingbenchmark and annual publication of amounts loaned through HELP.
  • Direction offunding targeted to equity and access in participation to where it will have the greatest impact.Public funding to assist universities’ equity and access programs should reflect the institutions’ enrolment and retention of low SES students.
  • Work withuniversities to advance international education, including through maintaining a strong quality assurance regimeand continuing to expand global mobility programs for students, academic staff and researchers.
  • Establish an Australian Higher Education Taskforce to provide oversight of policy review and reform and strategic advice to government and policy makers.
  • Fund closer to the full cost of research bringing greater alignment between competitive sources of research funding and the indirect costs of research.
  1. Reshaping the demand driven system

The demand driven system, introduced in 2012, was an important development in Australian higher education, addressing some of the key deficiencies of a centrally managed allocation of student places. The demand driven system has largely addressed unmet demand and has better enabled university education to meet the changing skills needs of the Australian economy. Where skills shortages emerge and demand for the relevant courses increases, a university or other higher education institution (HEI) can respond.

The Government’s review of the demand driven system in 2014 found that “on the early evidence, the higher education system is more reliably adapting to skills shortages than it did before.”[1] However, the demand driven system contains few incentives for universities to diversify the provision of higher education: while undergraduate degree participation has grown substantially, important sub-degree programs have not had the capacity to grow in line with the needs of the economy. Commonwealth supported postgraduate coursework programs are restricted. At the same time, the financial incentives for growing undergraduate education has created a funding challenge for Government, as growth has been more rapid than anticipated.

An integratedtertiary educationsystem,whereanyqualifiedstudentcangainaccesstoanappropriatehigher education or vocation education place, should be a long-term goal for Australian post-secondary education.

To move towardssuch integration, which itself is amuchbiggerchallenge requiring agreement on VETreform by the States and Commonwealth, the Government should reshape the present demand driven system to be a bedrock for future reform. The government has indicated funding further expansion of the demand driven system is unlikelyas it faces fiscal constraints and competing priorities. In the absence of expansion of the system, it should modify the current arrangements to drive educational innovation and choice,and facilitate sectoral diversity,while carefully managing the inevitable trade-offs.

  1. An updated demand driven system

To reshape the demand driven system, a coherent and sustainable system-wide solution is required to incorporate sub-bachelor and postgraduate education. The government should investigate the best means to achievethis so it is fair to students, manageable in terms of public outlays, andsupports institutional mission differentiation. To support quality outcomes and align with employment needs and institutional mission, university and government could explore funding agreements which could include options for targeted growth using a‘tradeandcap’system.

A ‘tradeandcap’systemwould, for example, enable a universityto trade demand driven undergraduate places in specific areas (through a ‘cap’) for the capacity to offer more or demand driven places ateither postgraduate or subbachelor level. This would enable specialisation and student choice, and an alignment with institutional mission. An institution would agree with the Commonwealth which study areas and degrees were traded and on what terms. Such an arrangement would enable the chosen mix to drive genuine diversity and strong graduate outcomes within the system.

Reshaping the demand driven system in this way would be a long-term policy reform,not a driver for short-term savings measures, although some savings could be achieved through moderated growth. Institutional funding agreements should reflect a genuine dialogue with government based on institutional mission, be for minimum three-year terms, and deliver the institutional autonomy and flexibility needed to deliver quality outcomes.

The University of Melbourne supports the continuation of demand-driven funding, albeit with modifications. However, should it be deemed desirable to moderate growth in the short term, this should be done in a way compatible with labour market needs alongside equity and access considerations. Options might include offering universities a total envelope wherein an institution could decide the mix of sub-bachelor, bachelor and Commonwealth supported postgraduate places. Short-term caps might be considered for professional qualifications where course demand clearly outstrips graduate employment. Equally, it could look at providing additional incentives, such as uncapped places that were tied to equity and access outcomes agreed with universities. Rules around any such temporary moderation of the demand driven system would need to be transparent and consistent.

Recommendation: Reshapethedemanddrivensystem to support quality graduate outcomes and alignment with employment needs and institutional mission. Such reshaping should incorporate theinclusion ofpostgraduatecourseworkandsub-bachelordegrees, thereby recognising the importance of diversity within higher education delivery, and a renewed focus on flexibility within institutional funding agreements.

  1. Transparency in resourcing for teaching

CommonwealthsupportforteachingcontinuestoreflecttheRelativeFundingModeldevelopednearlythreedecadesago,withlimitedadjustmentsovertime. Similarly,studentcontributionratesarebasedonhistoricassumptionsaboutcostandfutureearningsthathavebeenmodifiedinadhocways.As a result, the relationshipbetweenthecostofhighereducationanditsprice has become less clear.

  1. Understanding reasonable cost of delivery

The government has indicated in the DrivingInnovation,FairnessandExcellenceinAustralianHigherEducation options paper that it seeks to work with the sector to better understand the cost of delivery.

Government,policymakersandthehighereducationsectorlackaclear,evidence-basedunderstandingof areasonableresourcingcostper-studentnecessaryfordeliveringqualityhighereducationinAustralia. An agreed benchmark is an important precondition for future reform and any change to the Commonwealth Grants Scheme.

The2011BaseFundingReviewprovidessomeevidenceforuniversityteachingcostsbutdoesnotextendanalysistoassessingwhetherthisisareasonableamountorsimplyreflects that universitiesspendwhattheyreceive. A modest,targeted,technicalexercisetobuildanevidencebasetounderstandthecostsofeducationprovisioninthehighereducationsector would deliver the required evidence.

  1. What a benchmark would look like

Abenchmarkwoulddesignateaquantumoftotalperstudentresourcingnecessaryforqualityeducation. Its scope would consider the following:

  • Sub-bachelor, bachelor, and postgraduate course work, including honours level education (not research higher degrees).
  • The benchmark should provide a quantum, which does not adjust for size or location of an institution, as any differences will be captured in the cost data from universities used to develop a benchmark.
  • As far as possible, a benchmark should be driven by activity and reflect difference between disciplines and levels of study only insomuch as there are differences in activity.
  • The exercise should assess the best way to incorporate into the benchmark the ongoing costs necessary for the delivery of quality education, including a quantum for library, administration and other relevant direct costs. This might include a component for scholarship and other activity to directly inform quality educational delivery.
  • The exercise should not account for major capital costs.
  • A benchmark for teaching resources should not include a specified proportion related to research or other activities separate from education. While the current CGS does incorporate an amount for this, the benchmark should assess reasonable teaching costs not the CGS per se. It is important in any review of the CGS that government examines access to support for research. This will ensure that alongside teaching, research is properly supported, especially given current cross-subsidy of research from other revenue.
  1. Developing a benchmark

A reviewshould be undertaken to examinethecurrentcostofdeliveryacrossthewholesectorandmoderate findings basedoninternationalevidenceforbestpracticeandotherresearchintohighereducationcosting. Thebasisformoderationwouldbetransparentandsystematic,thusensuringtheintegrityandcredibilityofthebenchmark.

Specifically,abenchmarkwouldbedevelopedthroughanexercisethatwould:

  1. establisha clearscopeforthebenchmark,including deciding on whatitwas,andwasnot,measuring (as outlined above);
  2. reflectanempiricalsurveyofcurrentcostsatuniversitiesfordifferentteachingandotheractivitiesacrossthedisciplinestoextendandrefinetheBaseFundingReviewwork;and
  3. includeameanstomoderatethefindingsofthecoststudybasedonresearchandinternationalpracticetotransparentlyassesstherealcostsofeducationprovision.

Thereisinternationalprecedenceforthisproject. TheUK,NewZealandandsomeUSstateshaveundertakensimilarexercisestogreateffect. ThishastheaddedbenefittoanAustralianexerciseof providingguidanceinovercominganytechnicalchallengesindevelopingthebenchmark.

  1. Benefits of a benchmark

An evidence-based benchmark has thefollowingbenefits:

  • governmentandpublicalikecanhaveconfidenceinfuturefundingarrangements,asitprovidesawaytomoreaccuratelycalculatetheimpactofanychange;
  • itprovidesatoolforhighereducationproviderstodemonstratetostudents,governmentandpublicthattheirinvestmentisbeingdirectedtoqualityeducation;
  • itallowsuniversitiestoshowhowtheyareabletofindandimplementinnovationsandefficienciesinthedeliveryofeducation; and
  • it would provide a level ofconfidencetostudents,communityandgovernmentthatreasonablefeesarebeingchargedasaresultofanychangesinfuturepolicysettings.
  1. Student contributions and support

a. Student contributions

The evidence shows that university education delivers wide public and private benefits. The central challenge in realising these benefits is to achieve a fair balance between contributions made by the public and student towards the cost of delivery. In order to do this, a number of factors need to be considered, including the reasonable costs of quality provision and investment needs over time.

Adjusting student contributions requires careful consideration. While acknowledging that private benefits from universityeducationaregenerallyhigh,therearelargedifferencesbetweenthe areas studied and, while studentsreceive great benefitsfromobtainingauniversitydegree, there are variable financial benefits. For example, Dentistry,MedicineandInformationTechnology tend to provide greater average financial benefits over a working lifetime than VisualandPerformingArts.[2]

Government commissioned research shows the significant contribution Australian higher education makes to the country. Each additionalyearofhighereducation undertaken by an Australian student is estimated to provide benefits to the country at between $6,000and$10,000.[3]A recent Deloitte report also found that the sector as a whole makes a multi-billion dollar contribution to the nation’s economy each year.[4] Therefore, there is a strong case for strengthening public investment.

Any change to higher education policy should recognise their impact on students and on the capacity for their universities to deliver quality education. The government should carefully weigh any options for change to the student contribution to ensure they are as equitable as possible and assess any changes to public support for teaching alongside any changes to the higher education loans program. For example, the government should carefully assess any measures, such as a household test for repayment, to ensure they are not a retrograde step in terms of social policy.

Other measures to equitably ensure HELP is repaid, such as whether it is feasible to extend liability to estates in a manner similar to other debts, might be considered.

To assist in providing greater transparency for the student financial support system, the government should consider publishing annually in the Commonwealth budget additional information on amounts loaned through HELP.

Recommendation:Ensure that any change to the balance between public and private contributions is informed by an analysis of the impact on students and on the capacity of universities to undertake quality teaching and research. This should be supported by greatertransparencyintheresourcingofteachingandeducationthrough development ofanagreedresourcingbenchmark and annual publication of amounts loaned through HELP.

b. Information for prospective students

The University welcomes the focus in the options paper on providing additional information for students. The University agrees that undertaking a higher education qualification is a significant investment for students; both in monetary terms and the time it takes to complete a course. Initiatives, such as an expanded Quality Indicators for Teaching and Learning, andprovidingstudents withthe information they need for informed decision-making about which course to undertake and with which institution to enrol.

  1. Equity and participation

The Demand Driven system has also helped ensure that scarcity of places is not itself a barrier to entry to students who have faced socio-economic and other disadvantage. The growth in enrolments facilitated by the demand driven system has seen tens of thousands of more students from under-represented groups commencing undergraduate study each year, although overall the representation of disadvantaged groups has remained disappointingly low. There is a role, therefore, in a reshaped demand driven system to enable further efforts to address equity and access.

Lifting the proportion of students who have been traditionally under-represented at university (including those who experience socio-economic disadvantage) has proven slow work in Australia. The proportion of low SES undergraduates has remained stable at around 16-17 per cent of all students. This means disadvantaged Australian students are proportionally little better off in terms of attaining entry to university than they were a generation ago.

The indication in the options paper that the government intends to review its equity programs to ensure they are as effective as possible is welcome. The government could maximise the impact of current resources for equity and access by allowing funding to follow students and be allocated transparently on the basis of enrolment. Public funding to assist universities’ equity and access programs would be incumbent on their enrolment and retention of low SES students.

Recommendation: Direction of funding targeted to equity and accessin participation to where it will have the greatest impact. Public funding to assist universities’ equity and access programs should reflect the institutions’ enrolment and retention of low SES students

  1. International Education

The Australian higher education sector has grown international education into one of its finest achievements. Australia now has globally linked universities with well-regarded international rankings. International education is now the nation’s third largest (and Victoria’s largest) export. Australia is one of the most popular destinations for higher education, attracting an estimated 10 per cent of the world’s international students which contributes nearly $19 billion to the Australian economy annually.

From this strong starting position, there are significant opportunities for growth, and competitive challenges to be met. The Australian Government’s National Strategy for International Education released in early 2016 identified international education as one of the five sectors that can drive the next wave of Australia’s prosperity.

A fundamentally important aspect of expanding Australia’s international education global share is protecting the strong reputation of the Australian higher education sector. This will require ensuring strong levels of investment and coordinated efforts by Commonwealth and State governments, and also working strategically with higher education providers, regulators and key agencies, to assure quality.

At its highest level, enhancing Australia’s international education reputation will mean ensuring provision of high-quality education across the sector, good student support as part of the qualitative student experience, safe and welcoming communities, affordable accommodation and public transport options and clear post-study employment or work experience opportunities in Australia (with enabling post-graduation visa options).

The quality and fairness of Australia’s international education is protected by the Education Services for Overseas Students (ESOS) legislative framework, which enshrines important protections for international students in Australia. The University supports efforts to strengthen and streamline ESOS oversight and subsequent regulation by other higher education and vocational education frameworks such as TEQSA.

Further measures that can ensure a positive student experience, maintain Australia’s global reputation and grow Australia’s competitive stake in emerging international education markets are welcome. This includes: (1) deepening investment in strategic programs to protect and expand high-quality international education and Australia’s global reputation as an education destination; and (2) continuing to expand global mobility programs for students, academic staff and researchers with a view to increasing international partnerships and collaboration.

Recommendation: Work withuniversities to advance international education, including through maintaining a strong quality assurance regime and continuing to expand global mobility programs for students, academic staff and researchers.

  1. A higher education taskforce

The government has indicated in DrivingInnovation,FairnessandExcellenceinAustralianHigherEducation it intends to establish an expert panel to drive reform. This is an important initiative that could be established permanently as a dedicated Australian Higher Education Taskforce (AHET)or similar to coordinate implementation, work with universities and industry and provide a holistic view of the reforms.

The AHET would have a diverse membership, perhaps incorporating the expert panel, to provide advice to government on policy settings. The AHET would act as an expert and independent central advisory and implementation body for government on the higher education system, taking account of the responsibilities of government and its several departments.