Research released today shows that the federal government’s promises to provide more student places via its Job-ready Grads Package were hollow promises. We now have information from university funding agreements about the maximum amount of subsidy each university can receive between 2021 and 2023.
My research has shown that the amount available doesn’t have enough money to pay for student subsidies, much less the additional 30,000 dollars this year, which Treasurer Josh Frydenberg announced in his budget speech in May. The government made major funding changes in higher education funding one year ago. These changes were market as Job-Ready Graduates. Dan Tehan, then education minister, state that these changes sold.
The government wants more Australians to be able to receive a university education. Due to the COVID-19 recession, we will need these additional places starting next year. It will not help the 12s in 2020 or the 2021 retraining of Australians if we do nothing for a year or two. Refusing to help our economic recovery is not a good idea and can lead to a scarring of a generation.
These changes resulted in student contributions increasing on average while government subsidies decreased for student places. Accepting these changes made possible by an increase in student places. We could have relied on the government’s policy to see more working-age Australians en roll in higher education every year of this decade, if we had.
What Was The Government’s Student Promise?
The promise of the Job-ready Graduates was to increase student place subsidies over time. This was to meet the increased demand in areas with high population growth, and the Costello baby boom generation entering university age. The government promised 27,000 additional domestic student places by 2021, and almost 100,000 by 2030. In 2019, there were 627,545 Commonwealth-support student places.
The government does not fund a fixed number of student places. The government sets the maximum amount it will pay to universities for student places under the Job-ready Graduates arrangement. Each student place receives a subsidy with varying amounts depending on its discipline.
Each university can decide how many and what mix of student places they provide. It is only entitle to the maximum amount of government subsidy for student place. It does not receive the student contribution if it provides more places than its subsidy limit. This is usually insufficient to cover costs.
The Senate committee inquiry into these changes was advise by me that it was a mystery as to how the government came up with its estimate of the number student places needed. From the publicly available funding agreements, universities now have information about the maximum amount of subsidy each university can receive from 2021 through 2023. We also know how the maximum amount will increase each year until 2030.
Subsidy Subsidies Continue To Be A Student Problem
The government seemed to have radically changed its funding policy for student places in the past three years with the employment-ready graduates. It stopped funding in 2018 and 2019. Subsidies increased less than inflation in 2020. These decisions effectively reduced the number of government-subsidised student places.
In 2019, there were 27800 spots in the system where the government withheld over A$322 millions in subsidies. When COVID-19 struck in 2020, universities were already paying the price. The revenue receive by universities continues to be reduce by the government’s response to the pandemic. This included closing the borders for international students.
Another source of subsidy shortfall hidden in the details of the transition to Job ready Graduates. This will limit universities’ ability provide student places. Students who were grandfather before 2021’s changes became effective are those who began their courses prior to the changes. They do not have to pay more student contributions. They continue to receive the higher subsidy rate from the government in order to ensure that funding is not cut.
These grandfathered students are not covered by university subsidy limits. They will likely be short $300 million in the amount of time it takes to finish their courses. The period 2023-2025 will see an estimated $200 million.
By 2024, The Shortfall Will Exceed $1 Billion
Below is the chart that shows the total government subsidies over the next ten years. The 2021 amount is insufficient to cover student subsidies. The combination of all the changes since 2018 has led to the fact that the government has failed to deliver on its promise of subsidy in 2021. This is equivalent to 39,000 student spots 27,000 more places under Job-ready Graduates, and 12,000 additional places in the system from 2019 that are still unsubsidized.
Although the deficit decreases over time, the government still subsidises around 14,000 more student places per year than it promised. To honour the claims it made before the parliament and the public, the government would have to provide $1.1 billion more subsidy between 2021 and 2024.
To influence student choice, the government set explicit student contributions. It wanted to encourage students into jobs-ready disciplines. Students will respond if they are satisfied. They will move from low-subvention disciplines to more subsidised ones. This policy, if successful, would raise the average subsidy cost per place. This would also reduce the number subsidised places universities could offer within their maximum subsidy levels.
It could have adopted a policy more efficient and simpler if the government wanted to ensure universities are able support Australia’s economic recovery. It could have offered subsidies to help support student loads already in 2019 as a first step. Could have raised subsidy levels to ensure that working-age Australians in 2021-2023 have the same opportunity to study higher education as they did from 2014-17, before the funding freeze.
These opportunities may be restored in the long-term if the subsidy rate continues to grow, but this election is only two years away. The priority may then be to reduce government debt. It is possible for the government to decide to stop increasing subsidies every year. This will not require legislative changes.