Tertiary sector braces for competition

WA’s higher education sector is gearing up for change as the federal government considers major reforms.

Western Australia’s higher education providers are cautiously supportive of proposed reforms that would open up the tertiary education sector to more competition than ever before.

The federal government signalled last week that it is likely to act on key recommendations of a major review into the tertiary education sector as it prepares to release its budget later this month.

The government-commissioned Kemp-Norton review recommends an expansion of the demand-driven system introduced by the Labor government in 2012, which gives universities the freedom to determine how many Commonwealth-supported undergraduate places they can offer without capping numbers.

Significantly, the review recommends extending Commonwealth funding to private universities and other non-university higher education providers, with the aim of increasing competition in the sector and boosting the quality of teaching and graduates.

It also gives in-principle support to providing universities with the option of charging full fees for selected courses, which the Group of Eight universities has previously advocated.

With universities already competing for students against rival domestic and overseas institutions, as well as a raft of low-cost online education providers, the proposed reforms would force universities to intensify efforts to adapt and innovate in their efforts to court a new generation of students.

Policy headwinds

Speaking at a boardroom lunch hosted by Business News last week, the heads of universities and other tertiary education providers were largely in favour of government providing universities with greater freedom to chart their own course following a period of substantial policy adjustments.

Murdoch University vice-chancellor Richard Higgott said the higher education sector was particularly exposed to policy change as a result of government providing most of its funding and largely determining its regulatory settings.

“The higher education sector is a sector that is affected by things like exchange rates and by all the normal market conditions of brand, reputation and quality but it’s also a sector that is sensitive to government policy change,” Professor Higgott said.

“I think between them, the last government and the current government have got the direction of travel right, even though they’ve made some policy mistakes. I’m very encouraged by the deregulatory urge of this current government.”

The public university leaders who spoke to Business News were generally supportive of moves to extend Commonwealth funding to their private counterparts, saying they welcomed the competition the changes would bring.

Some private universities, such as The University of Notre Dame Australia, already receive Commonwealth-supported places but would be eligible to receive more if the reforms are implemented. Under the current system, however, only private universities can charge full fees for most undergraduate courses.

University of Western Australia deputy vice-chancellor (education) Alec Cameron said public universities should have the option of charging full fees for selected courses to ensure an even playing field against private competitors.

“My strong argument on behalf of a public university would be to say there are a lot of freedoms that private or non-university higher education providers have at the moment which are not available to public universities,” Professor Cameron said.

“If Commonwealth support was extended to non-university higher education providers, and I personally would support that as an extension, we would want to see a level playing field.”

Edith Cowan University vice-chancellor Kerry Cox went as far as to suggest the more prestigious public universities such as UWA could go entirely private but Professor Cameron hosed the suggestion down.

“Business and law are good examples that would actually provide a positive return for some of those universities (but) there are some other areas, I think, where the fee-paying market perhaps doesn’t exist to the same extent,” Professor Cameron said.

In its submission to the Kemp-Norton review, the Group of Eight universities proposes that the savings to the Commonwealth generated by a move to full fees for selected courses would build up dividends that could be reinvested in initiatives to support students, research and community engagement.

The proposal is bound to be the subject of debate, however, with the National Tertiary Education Union arguing students will bear the cost of any fee increases.

Curtin deputy vice-chancellor (academic) Colin Stirling told Business News the government should give serious thought to the importance of education as a public good.

“In a scenario where the student pays, it anticipates education as a private good that benefits only the individual themselves but education is a public good that benefits society and the nation,” Professor Stirling said.

“In those terms it would seem to me unreasonable to expect individuals, and especially individuals from perhaps underprivileged backgrounds, to be able to find the entire resources for their education. That scenario breeds an elitism that isn’t necessarily conducive to the success of the nation in the modern economy.”

New players

While the proposed Kemp-Norton reforms were generally well received, Australian Institute of Management WA chief executive Gary Martin said the recommendations did not go far enough in distinguishing between different types of tertiary providers.

Professor Martin argued there should be separate funding models for emerging specialist providers such as online study providers or residential colleges.

“I just don’t see how this changes things in a big way in terms of what we’re doing,” he said.

“We’ve already got a lot of uniformity in the system and that’s because of the funding model. We’ve got five schools of education; we’ve got five schools of business; we’ve got five nursing schools.

“That’s not the diversity that I think the government intended when they started to play around with funding.”

The emergence of low-cost online education providers poses a fresh threat to traditional academic institutions.

The state’s universities increasingly offer a mix of classroom learning and online content and have revised their course offerings in recent years in line with changing student demand.

However, the extension of Commonwealth funding to providers outside of the current system raises the prospect of new institutions cherry-picking the more lucrative functions of existing universities while avoiding the heavy costs of academic research.

“As public universities, we have a very bundled business model with significant cross-subsidies from one activity to another activity,” Professor Cameron said.

“The likelihood of new entrants is that they would potentially disaggregate the services that we provide.

“They will obviously go after the profitable ones and that will represent a challenge for us because if we lose those profitable activities, it undermines our ability to do the social good and the loss leaders like research and other things that are part of our whole.”

Professor Cox said universities should remain guided by research despite its growing cost.

“The central issue for universities is the capacity to perform research and to do so productively, rather than just teach,” he said.

“Ideally, it should be teaching that is informed by the research. The research sets the path.”

International appeal

While the introduction of the demand-driven system has lifted overall student numbers, the proportion of school leavers that go on to university in WA is still lower than most other states and high school graduate numbers will effectively halve next year as a result of changes to the school-starting age a decade ago.

The level of Commonwealth funding per student place is forecast to decrease in real terms over coming years, driving universities to increasingly look towards lifting enrolments from the more profitable international and postgraduate student markets to sustain their activities.

The push for more international students has pitted the WA education providers against intense competition from other states, major developed nations and, more recently, emerging markets such as China, where new universities have sprung up at an extraordinary rate.

The government-funded Perth Education City, which markets Perth as a destination for international students in partnership with the state’s tertiary education providers, believes more needs to be done to encourage high-level collaboration and attract students from future markets, such as Pakistan, Mexico and Brazil.

“We’re a regional city in a very important region but sometimes we overplay our own importance,” PEC executive director Mike Ryan said.

“If you look at who the players are by number, China is now the third-biggest provider of international education in the world and that’s just going to carry on growing.

“The issue for us is what can we do as a regional destination with five universities and how can we coordinate what we do in terms of marketing efforts.”

Mr Ryan said WA could attract more interest as a study destination if it promoted internship opportunities as a point of difference for international students.

Challenger Institute of Technology acting chief executive Melanie Sorensen echoed these comments, saying it was also an effective way for training organisations to maximise their resources in times of reduced capital investment capacity.

“If you can maximise the time that they spend training online and in the workplace, it’s a better use of our facilities and equipment,” Ms Sorensen said.

“We can then perhaps increase our student numbers, and the cost to the agencies sending their employees to us is a lot less.”

While reforms implemented by the former Labor government, including the introduction of post-study work rights, have had a positive effect on attracting international students, overall numbers are still down.

Curtin University, which hosts Australia’s third-largest international student population, has experienced a big drop in its international student numbers in recent years, driven partly by the high Australian dollar.

“We’re seeing those enrolments way below where they were back in 2008 or so,” Professor Stirling said.

“We’re still making significant efforts in that area to try and bring those students back onshore.”

Economic importance

Speaking in London last week, federal education minister Christopher Pyne described education policy as “economic policy” and said the coalition government was the sector’s biggest supporter.

In the clearest signal yet that the government is likely to act on the Kemp-Norton review’s recommendations in the near-term as it prepares to release its budget, Mr Pyne said further changes to the demand-driven system were needed.

“I will not pre-empt the budget today, otherwise the treasurer may have something to say,” he said.

“But I repeat what I have said before: ours is a deregulatory government. I can assure you unreservedly that the coalition government will continue to take steps to set higher education providers free, provide them with more autonomy, and challenge them to map out their futures according to their strengths.”

Despite this rhetoric, the tertiary sector has not been immune from efforts to rein in government spending.

The Abbott government is seeking to legislate $2.3 billion in higher education spending cuts, including an efficiency dividend on Commonwealth grants, the removal of discounts on upfront fee payments and the conversion of student start-up scholarships into HECS-style loans.

The cuts were initially introduced by the Labor government and tied to its proposed Gonski school reforms, but with the Gonski scheme scrapped, Labor has signalled it will team with the Greens to block the cuts.

With a group of new Senators due to take office in July, however, the government may find fresh support for the measures.

Prime Minister Tony Abbott last week appeared to confirm that the budget will include changes to university funding, telling a function in Sydney last week the government planned to give universities more autonomy.

“Universities’ funding will shift but they will have much more freedom to innovate and build on Australia’s strength as a magnet for students, teachers and researcher from around the world,” Mr Abbott said.

Professor Cox said the government’s intention to open up tertiary education was positive but warned against any moves to reduce public expenditure. 

“The Australian government by OECD standards does not actually pay a large proportion – 47 per cent of expenditure on Australian universities is from the government (but) the OECD average is 68 per cent,” he said.

“That’s a restriction on free thinking and innovation.”

The education leaders who spoke to Business News were keen to emphasise the importance of the sector to the general health of the economy.

“Universities have other functions in society as well,” Professor Higgott said.

“They’re not just educative of student bodies; they’re important parts of the policy process in some ways, in terms of the research that they produce and the innovation that they produce.

“They’re important communicators and important facilities for other stakeholders in the community.”