The changes to higher education in this budget are more significant than in previous budgets, though they are in keeping with the ‘governed deregulation’ that is this government’s preferred approach to public education (in contrast private education is subject to ‘ungoverned subsidisation’).

Of the major problems in the system — straitened operating funds, too much red tape, the decline in basic research capacity, and the decline in student financial support forcing student disengagement — the budget addresses the first two to a qualified extent, but not the last two, which arguably are more important issues, though they get less airplay.

Lifting the restrictions on full fees are a major step in the direction of system stratification and the privatisation of finance.

It is noticeable that there are no compensating measures on the equity side; and the growth of full fee places at scale creates a significant breach of the merit principle at the point of entry. These should be public policy issues but it seems that they are not, according to the budget papers.

The Howard government has always pushed the universities towards market deregulation, higher student fees, system stratification, and the devolution of public policy to university managers. At the same time the government continues to maintain a surprisingly high level of political control of the sector.

Thus the new $5 billion endowment fund in one sense mirrors the university-controlled endowments of the American Ivy League universities, where a few institutions control large private fortunes so as to secure strong research resources and dominate the other institutions. But grants from the fund will be nationally controlled and distributed.

Even the use of the separate private donations made to Australian universities will become tailored to Canberra-defined national purposes so that universities can maximise income under the matching grant arrangements. It is striking how DEST manages to maintain such a level of control over strategic development priorities without buying that control with front-end loaded funding.

The net outcome of the changes will be to increase the monies available for teaching and administrative costs and it will make life easier for university managers, especially now but also to some extent through the endowment fund in the longer term – PROVIDED the rate of subsidisation of HECS places is not whittled away in future. In turn this will strengthen the government’s political position in the sector.

I doubt however that this is the best use of increased subsidies; and arguably the two major and immediate needs are not met: (1) the need for a substantial increase in basic research infrastucture to strengthen our long term global position, including a substantial growth of post-docs to secure academic quality in the next generation, and a big jump in PhD scholarships for international students to ground our research role in the Asia-Pacific; (2) a sea-change in student financial assistance that would reduce incentives to work during semester and allow more students to fully engage with their studies.

My worry is that the monies derived from increases in the rate of subsidy of HECS places and more flexibility to create HECS income at the margin of student numbers will be spread thinly across the system and be soaked up by the backlog of operating cost needs without improving quality or securing the specific, strategic investments that would maximise outcomes (such as post docs and international PhD scholarships).

The new endowment fund creates a potential stream of increased research monies but the scale is too small to correct two decades of under-funding of basic research. That problem, which is probably the most important problem of all for the national policy to solve, remains to be addressed. The gap between Australia’s research performance and that of Singapore, Korea, Taiwan (and in the future China) will widen as a consequence.

The other lacunae in the budget are that it does not address the distortions caused by our high commercial volume maximising approach to international education, and more generally, does nothing new to strengthen regulation of quality despite the raft of problems in that area.

Peter Fray

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