Overview of the higher education sector in Australia
Broader higher education sector setting
The university sector is a part of the higher education sector in Australia. For the purposes of this study, higher education is defined to cover the teaching of bachelor and higher degree courses and research activities at universities and other higher education institutions.
Outside of the higher education sector but nevertheless still within the broader tertiary education sector are occupational-specific programs, such as those provided in Australia by Technical and Further Education (TAFE) Institutes, which do not teach bachelor or higher degrees.
In 2005, the higher education sector comprised the following:
- 37 public universities;
- 2 private universities;
- 1 approved branch of an overseas university;
- 4 self-accrediting higher education providers; and
- around 130 non self-accrediting higher education providers.
In 2005, there were 957,176 students attending Australian higher education providers. This was equivalent to an EFTSL of 674,092.
The 38 UA member universities comprise the 37 public universities and Bond University (Bond is one of the two private universities in the higher education sector – the other being The University of Notre Dame Australia). The 38 member universities of UA comprise the vast bulk of the higher education sector. In 2005, the EFTSL at UA member universities was 662,075 – accounting for in excess of 98 per cent of the higher education sector on this measure. For this reason the terms university sector and higher education sector are used somewhat interchangeably throughout this report.
Overview on the higher education sector
Introduction
The demographics and finances of the higher education sector overall are central to an understanding of the campus services sector. In providing an overview of the campus services sector it is appropriate therefore to review the historical and current position of the higher education sector as a whole.
Australian Universities – a century and a half of growth and achievement
The number of universities and university students within Australia has during various periods over the course of the past century gone through some major changes in terms of numbers of universities and students, as shown in Table 3.1 below. Notwithstanding the extent of these past changes, higher education within Australia is now best described as a mature sector.
Financial and enrolments overview of the university sector over the past decade
The Australian university sector has had growth in revenue of about 7.0 per cent per annum compound (or about 4.3 per cent per annum compound in real terms) on average over the course of the past decade (1996 to 2006).17 Over the same period the sector wide average annual compounding increases in EFTSL and revenue in real terms per EFTSL were 3.5 and 0.8 per cent respectively (revenue in real terms per EFTSL was up over the decade). See Table 3.2 below.
For the 2007 year the higher education sector overall is likely to book revenue in excess of $16 billion, to have net operating income in excess of $1 billion and to have net assets in excess of $30 billion. Over the course of the past three years (2004 to 2006) growth in EFTSL has eased off somewhat and is now running below three per cent per annum as shown in Table 3.2 below. Most media recent reports indicate applications for university entrance for the 2008 academic year are down an average of 2 per cent nationally.
Table 3.1
| Numbers of Universities and Students as % of National Population 1901 to 2006 | |||||
| Year | No of Unis | No of Stud’ts | Nat’l pop’n | % of pop’n | Comments |
| 000’s | Million | % | |||
| 1901 | 4 | 2.7 | 3.8 | 0.07 | The Universities of Sydney, Melbourne, Adelaide and Tasmania established between 1850 and 1890 |
| 1948 | 7 | 32 | 7.8 | 0.41 | UQ, UWA and ANU established between 1902 and 1946 |
| 1960 | 10 | 53 | 10.4 | 0.51 | UNSW, UNE and Monash established between 1949 and 1958 with the higher education sector by then starting to enter the phase of dealing with the massive influx of ‘baby boomer’ students |
| 1975 | 19 | 148 | 14.0 | 1.06 | ‘Binary’ system of higher education (unis & CAEs) after the 1960 Martin Report with establishment of Macqaurie, La Trobe, UNE, Flinders, JCU, Griffith, Deakin, Murdoch and Wollongong between 1964 and 1975 |
| 1994 | 36 | 585 | 18.0 | 3.25 | Post Dawkins era from 1988 with formation of many new universities from former CAE’s |
| 2006 | 40 | 984 | 20.6 | 4.78 | Current position |
The overall healthy growth in numbers of higher education students over the past decade masks an underlying fragility in enrolments – over the period 2003 through 2006 more of the growth in absolute numbers of students was in on-shore international students than domestic students.
The high level at which the Australian Dollar is presently trading (AUD at around 91 cents USD) by historical standards is considered to pose risks going forward for sustainability of growth in this important on-shore international student segment of the higher education sector.23
Table 3.2
Financials and Students – Australian Higher Education Sector 1996 to 2006
| Year | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Revenue $Bn | 8.1 | 8.2 | 8.5 | 8.7 | 9.3 | 10.2 | 11.2 | 12.3 | 13.4 | 14.3 | 15.9 |
| Net Op Inc $Bn | 0.4 | 0.5 | 0.4 | 0.4 | 0.3 | 0.5 | 0.5 | 0.5 | 0.7 | 0.8 | 1.3 |
| Net Assets $Bn | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 23.7 | 25.3 | 26.6 | 29.4 |
| Students 000s | 634 | 659 | 672 | 686 | 695 | 726 | |||||
| 000s | 842 | 897 | 930 | 945 | 957 | 984 | |||||
| EFTSLC 000s | 491 | 514 | 524 | 544 | 558 | 588 | 627 | 651 | 661 | 674 | 692 |
| EFTSL % increase | n/a | 4.6 | 1.9 | 3.8 | 2.5 | 5.5 | 6.6 | 3.8 | 1.6 | 1.9 | 2.6 |
The exposure of the higher education sector to any sudden downturn in revenue from on-shore international students should be viewed in the context that revenues from this source in the 2006 year still represented less than 15 per cent of total sector revenue. Even if revenue from on-shore international students were to be reduced by 50 per cent, on the 2006 figures the sector as a whole would still show a positive net operating income.
The dispute over the level of funding from the Howard Government
Over the course of the past decade there was a great deal of debate about the level of contribution of funding by the Howard Government to the higher education sector – and about whether this contribution has been and is adequate in terms of meeting the needs of Australian families or adequate by international standards such as set by other OECD countries.
A central issue in the debate about government funding of the higher education sector has been the Higher Education Contribution System (HECS) introduced by the Hawke government in 1989 and subsequently extended by the Howard government in 1997, in 2002 (introduction of the Postgraduate Education Loans Scheme – PELS) and again in 2003/2004 as a result of the Howard Government’s reforms under Backing Australia’s Future. The idea behind the HECS system was to obtain a greater financial contribution from students towards the cost of their higher education.
The HECS system is an income contingent loan system. It provides loans from the Commonwealth Government to eligible students enrolled in Commonwealth Supported Places at higher education institutions. The loan covers all or part of the student contribution to the cost of the degree.
When the student receives a HECS loan the Commonwealth Government pays the loan amount directly to the student’s higher education provider on the student’s behalf. A HECS debt is then recorded for the student with the Australian Taxation Office against the student’s Tax File Number and becomes repayable by the student once the student’s annual taxable income goes above a certain level (presently $38,148).
The introduction of the HECS system has progressively reduced the burden on the Commonwealth Government of financing its share of the higher education sector. Commonwealth Government’s contribution (not counting HECS) to total university revenues in percentage terms dropped from about 57 per cent in 1996 to about 42 per cent in 2005.28
The increased financial burden HECS has placed upon students has not been without controversy.
The HECS system has permitted maintenance in real terms of total funding30 per Commonwealth Supported Place (CSP) at universities over the period 1996 to 2005.31 This outcome has in effect been achieved via real increases in the annual student HECS contribution amount at an average compounding rate of in excess of five per cent per annum over the same period.32 Commonwealth direct support (not counting HECS) per Commonwealth Supported Place declined by almost 20 per cent over the same period.
Subsequent to the Howard Government’s Backing Australia’s Future reforms a number of Vice Chancellors asserted that insufficient government funding was causing average student-to-teacher ratios to deteriorate.34 The Group of Eight (Go8) universities have also raised this issue. In a media release dated 28 October 2007 the Go8 stated:
...insufficient Government funding is causing student staff ratios to blow out, putting intolerable pressure on the quality of the student learning experience as well as on staff.
Successive Howard Government Ministers for Education were critical at various times of governance arrangements and management of universities.36 For example the Hon Julie Bishop, former Minister for Education, Science and Training, was quoted on 29 October 2007 by ABC Radio as saying:
"The administration costs of the universities are increasing at the expense of teaching and research, and I believe the universities should be employing more lecturers and fewer administrators..."
The Go8 in turn noted that university administration costs had increased as a result of increased Government regulation of the sector.38 In 2006 an AVCC commissioned report found that reporting requirements on universities had increased as a result of implementation of the Government’s reforms set out in Backing Australia’s Future.
Proportion of GDP spent on higher education by OECD standards
In 1995 Australian expenditure from public and private sources on tertiary education
institutions as a percentage of GDP was approximately 1.7 per cent. At that time only three OECD countries were reported by the OECD as spending more than this percentage on higher education - Canada (2.3), Finland (1.9) and the USA (2.4).
By 2004 Australian expenditure from public and private sources on tertiary education institutions as a percentage of GDP had decreased marginally to approximately 1.6 per cent.41 Australia’s position on this scale had dropped somewhat in the intervening nine years since 1995. In 2004 five OECD countries were reported by the OECD as spending more than this percentage on higher education – Denmark (1.8), Finland (1.8), Korea (2.3), Sweden (1.8) and USA (2.9) with Canada un-reported but based upon a Canadian year 2000 figure of 2.3 per cent probably above Australia with the result that there were probably six OECD countries above Australia on this scale by 2004 compared to three in 1995.
The remarkable change in expenditure on Australian tertiary education institutions over the period 1995 through 2004 by OECD standards was the change in the extent to which the expenditure came from private sources. In 1995 roughly 35 per cent came from private sources and 65 per cent came from public sources. By 2004 this mix had changed to the point that roughly 53 per cent came from private sources and 47 per cent came from public sources.
What this means in real terms is that by the measures of public versus private expenditure adopted by the OECD, public expenditure on Australia’s tertiary education institutions went backwards in real terms from 1995 to 2004. The compound average annual rate of real growth in public expenditure on Australia’s tertiary education institutions was roughly negative 0.1 per cent from 1995 to 2004 whilst over the same period the compound average annual rate of real growth in private expenditure was roughly 9.6 per cent. Australia appears to be the only OECD
country to have reduced public expenditure in real terms from 1995 to 2004. Australia’s position within the OECD countries in terms of public and private expenditure on universities as a percentage of GDP was overtaken by Denmark, Korea and Sweden over the period 1995 to 2004 and continues to remain behind Finland, USA and probably Canada. However in 2004 Australia was still within the top tercile of OECD countries by this measure. With 53 per cent of the expenditure coming from private sources Australia’s position is now closer to that of the USA (65 per cent) than the United Kingdom (31 per cent).43 In 1995 Australia’s position was closer to that of the United Kingdom.
The Howard Government’s policies did not move Australia closer to the USA higher education sector policies in all respects because Australia did not match the big increase in share of GDP seen in the USA where the public and private expenditure on tertiary education institutions went from 2.4 per cent of GDP in 1995 to 2.9 per cent in 2004 (Australia by contrast went slightly backwards, from 1.7 to 1.6 per cent as noted earlier).
Of course the OECD countries are not the only benchmark against which the Australian higher education sector can be compared. The growth in expenditure on higher education as a percentage of GDP in major growth economies such as China and India (where on-shore university enrolments are reportedly booming) is also material.
The extent of diversity in the higher education sector
It is worth noting the differences between the universities that make up the sector. A 2005 report by DEST had this to say, by way of overview, on the higher education sector in Australia:
Australian universities are generally comprehensive institutions offering a wide range of programmes. They vary significantly in size ranging from the largest with around 40,000 students down to the smallest at around 2,000 students. Most range between 10,000 and 20,000 students. Many universities are located in the major cities but a significant number are located in smaller regional centres. The larger universities usually have a number of campuses.
Size as measured by numbers of students is not the only variable by which Australian universities vary significantly. Net assets for the 40 institutions reported upon in the DEST Higher Education Finance Statistics series46 were on average about $43,000 per EFTSL for the 2005 year but this number ranged from about $20,000 per EFTSL in the lowest case to about $93,000 per EFTSL in the highest case. That is, the net asset positions of the individual Australian universities expressed on a per student basis vary significantly with the wealthiest university having more than four times the net assets of the poorest.
The academic reputations of Australian universities, as measured by global university rankings, vary widely. Table 3.3 below shows the numbers of Universities Australia member universities that were ranked in various ranges in 2007 in the Times Higher and Jiao Tong world ranking lists.
The widely differing ranking of the Universities Australia universities on the abovementioned world ranking lists (note this has been the case since these lists first appeared in 2003/2004)49 is arguably a powerful indicator of large differences in institutional quality and prestige in the Australian higher education sector. The term ‘arguably’ is used firstly because there are critics of these world rankings systems (Marginson, 2007)50 and secondly because rankings fuelled perceptions of quality are not necessarily the same as actual quality.
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