Group of Eight Submission on Managed Growth and Needs-based Funding

August 9, 2024

Mr Tony Cook PSM
Secretary
Department of Education

This submission responds to both the managed growth and needs-based funding implementation consultation papers. The Group of Eight (Go8) consents to this submission being published in full and notes that Go8 members may make individual submissions.

Introduction

Australia is not achieving its full potential partly because of ongoing skills shortages and chronic underfunding of our universities, particularly as it relates to funding research that is a driver of innovation. All this has translated into relatively weak productivity performance, and in turn has acted as a constraint on Australia’s ongoing prosperity.

Coupled with the added challenges of an ageing population and rapid technological progress, it is imperative that as a nation we invest in knowledge creation (research) and education to meet these challenges.

While education at all stages of life is important, employment increasingly requires knowledge and skills attained through higher education, especially the advanced knowledge and capabilities that university graduates need in the modern workforce.

The Go8 universities play a critical role in contributing to knowledge and skill formation in Australia. The Go8 universities are responsible for a fifth of all research and development expenditure in Australia, educate more than one quarter of all higher education students in Australia and deliver 120,000 quality graduates each year. The Go8 universities produce more than half of Australia’s science graduates, more than 40 per cent of engineering graduates, and award almost half of all research doctorates in Australia.

The ambition for Australia to achieve its full potential, including recognising the contribution underrepresented students can make, is precisely why the Go8 supports the Australian Government’s attainment goal of 80 per cent of working age people attaining a tertiary qualification by 2050, including boosting educational attainment by underrepresented groups such as First Nations students, and students with low SES backgrounds, disability, and from regional and rural communities.

Achieving the targets will need settings for funding of the tertiary education sector that substantially move the dial on student interest, participation in, and attainment of tertiary education. The settings need to support and not hinder our universities in delivering the research and university graduates (including postgraduates) that Australia needs today and into the future.

However, the Government’s proposals will work against raising student tertiary education attainment to the national targets. We propose a set of recommendations to arrive at a holistic funding model that can genuinely drive tertiary education attainment towards the agreed national targets.

Get the fundamentals right for the long-term

The Government’s response to the Accord provides the unique forthcoming opportunity of having an expert body, the Australian Tertiary Education Commission (ATEC), that will have the expertise to consider the funding system as a whole, including addressing the issues outlined in this submission.

The Australian Government should commission the ATEC to develop and arrive at a tertiary education funding model that can genuinely drive tertiary education attainment towards the agreed national targets.

Our recommendation for the ATEC is not about delaying reform, it is about getting the fundamental elements of a new funding system right so that as a nation we know and have confidence in the system delivering the all-important education attainment targets, and that we are not, in a few years again requiring another Accord type review.

Caps limit supply, not boost demand

First and foremost, we do not see how caps on domestic students (Commonwealth Supported Places (CSP)) at both the system wide and individual university level will bring the nation closer to achieving its agreed tertiary attainment targets. The caps will limit growth in tertiary education attainment, not facilitate growth.

The Go8 strongly supports a system that puts student choice at the centre, but this does not appear to be front and centre in the Government’s proposals. This proposed command and control system does the reverse. It will reduce the autonomy and flexibility of universities to respond to student demand and blunt student aspiration.

This comes at the same time as the Australian Government is looking to impose international student caps – a measure which the Go8 conservatively estimates would reduce revenue to Go8 universities by well over $600 million and in turn cost the nation over $5.3 billion in economic output and over 22,500 jobs in the economy.

This revenue is used across our universities to support teaching and research.

More regulatory burden

The Go8 is also concerned at the regulatory impost of the proposed caps due to universities having to monitor, report and comply with this new regulatory system. As a result of layers of additional compliance requirements on the university sector, the regulatory burden from compliance-based reporting is estimated by the Go8 to now exceed $565 million annually across the Australian university sector. Caps will further blow out this regulatory burden cost redirecting funding from teaching and research.

Job-ready Graduates (JRG)

The consultation papers provide no information on intended future government funding clusters and student contribution rates. Yet the Accord Panel highlights the ongoing damage of the JRG program.

The first step in developing a new funding system that drives participation and gives universities a more sound basis for their funding must be to abolish the JRG package.

It is incumbent upon the Government to address JRG immediately and explain how funding will be put on a growth path that is not about universities doing more with less, but genuinely enables universities to have the funding capacity to respond to student demand and lift tertiary education attainment.

While the JRG package impacts all universities, it is especially acute for the Go8 universities whose profiles differ to the rest of the sector in terms of, for example, concentration of provision of high-cost and advanced courses, such as in engineering, whose sustainability has been disproportionately negatively impacted by the JRG package.

System wide and individual university hard caps

The ATEC should use its expertise to consider alternatives to resorting to a system-wide cap. Further, under any new system, the Go8 does not support the managed growth target (MGT) or “hard cap” on CSP places for individual universities for the following reasons:

• Restricting supply as an attempt to boost demand and attainment by students is an illogical and ineffectual policy approach.
• The proposed command and control system of student caps does not support student choice, a key element of student success as students are empowered to make decisions about their education. Again, introducing another barrier to achieving the attainment targets.
• Domestic student caps and restrictions on universities in retaining student contributions above those caps will reduce budgets of universities and the funding available to fulfill their missions. The latest available Department of Education data (2022) suggests many universities, including five of the eight Go8 members, experienced operating deficits in that year. The university sector is still struggling in the immediate post COVID-19 period and does not need caps that constrain growth.
• Domestic student caps will exacerbate the significant negative impacts of the proposed international student caps. The Go8 has outlined how damaging the international caps will be to the sector and the Australian economy. On a conservative estimate, if Go8 members are capped to a pre-COVID 2019 level of international students, this will have a potential immediate negative impact of over $5.3 billion in lost economic output and result in jobs losses of 22,500 across the economy.
• The caps will reduce the autonomy and flexibility of universities to respond to student demand. These hard caps could lead to conservative behaviour from universities, including fewer offers made to students, to ensure they do not exceed their caps. This would undermine the Government’s goal, strongly supported by the Go8 universities, of increasing tertiary education attainment to 80 per cent of working age people by 2050.
• To make matters worse, the proposed caps system will result in extra regulatory burden on universities in having to monitor, report and comply with this new regulatory system. In 2022 the Go8 warned that, on a conservative estimate, the increased regulatory burden from compliance-based reporting exceeded $500 million annually. As a result of layers of additional compliance requirements on universities, in only two years, the regulatory burden from compliance-based reporting is estimated to now exceed $565 million annually across the Australian universities sector. Caps will blow out this regulatory burden cost further.

A genuine funding floor needs a better design

The consultation paper acknowledges that the proposed funding floor will have the unintended consequence of potentially reducing the number of enrolments across the sector and diverting resources from filling places at universities with greater student demand.

Clearly this is sub-optimal, as this will inhibit student choice and undermine the effectiveness of the system to ensure placed are filled.

The Go8 therefore recommends that the Government develop a more robust funding floor which does not create these unintended consequences.

Managed-growth funding for equity students

The principles of fulfilling student aspiration and choice (of institution) should be central for equity students as key levers of success. The Go8 universities have always supported equity students, including by investing in programs and other support for equity students to achieve success at Australia’s leading universities, irrespective of their backgrounds and location. This is evidenced by the critical measure of student retention – the Go8 all-domestic student retention rates are higher than the national average by 6 percentage points and remain higher than the national total for all of the equity groups.

There is no reason to limit aspiring equity students from receiving a CSP place at their preferred university should they meet the entrance requirements. As the Minister for Education has stated: “A big part of this [the Accord] is helping more kids from the suburbs and regions get a crack at uni and succeed when they get there.”^[1]

The Go8 recommends a purely demand-driven system for students in equity cohorts, without equity students being limited by university caps or student catchment areas.

An uncapped system would be a better and more direct way to facilitate the growth required in educational attainment for equity students than the proposed managed system for equity students.

The “student catchment area” for equity students has little policy rationale and should be abandoned. It puts an unnecessary obstacle in front of equity students. Student acceptance rates dramatically decline for their lower ranked preferences. Forcing students to choose a university that is in their catchment area, but a low preference will further deter students. Go8 universities recruit from all over Australia, with regional and remote students at metropolitan campuses recruited from outside of local geographic areas. The proposed student catchment areas will act as an unnecessary regulatory constraint for equity students who do not receive a place at a university of their choice.

The Go8 also recommends that the Government commission ATEC to develop an appropriate classification of equity students, including a review of equity student cohorts to support the attainment goal. Specifically, further work is required to define student eligibility for funding and other support for equity students, better define the definition of low-SES and consider a potential student’s individual circumstances, e.g., level of qualification of main carer or ‘household of origin’ circumstances. Using a location-based measure, as is currently done, is not an accurate measure of low-SES.

Needs-based funding

The principle of a student-centered approach also applies to needs-based funding. On this basis, the Go8 recommends the following features should be included in an effective needs-based funding system:

• Providing support based on headcount, not EFTSL. A students’ needs are not limited to their study load.
• Not scaling elements of needs-based funding solely or predominantly using the ATAR (because the ATAR is not necessarily the best and only indicator).
• Needs-based funding should be expanded to include postgraduate students to support retention and completion through the entire academic pipeline as students from underrepresented backgrounds still require support during postgraduate study.
• Developing a common definition for ‘cumulative disadvantage’ across the sector and finding ways to support those students who are represented in more than one equity cohort.
• Not conflating the need to support universities appropriately with the need to support students. A needs-based system should apply to all regional and remote students to support student choice as these students require support regardless of their chosen campus location.
• Support universities to direct funding in a way that suits their specific communities, including towards outreach programs. The prescriptive nature of the proposed needs-based funding model may discourage innovation and limit opportunities to pilot new, bespoke programs and it appears to exclude outreach programs altogether. Outreach programs are fundamental to raising aspiration in future students and therefore supporting the overall attainment targets.  

Support for Indigenous students

Providing Indigenous postgraduate students with support is vital in addressing the Indigenous academic pipeline and in turn attainment by this cohort of underrepresented students. The Go8 notes that Aboriginal and Torres Strait Islander postgraduate students are currently supported via the Indigenous Student Success Program (ISSP), which provides flexible funding to universities to tailor their services to match student needs, and a new system needs to retain this program.

Clarification is needed to differentiate between the Indigenous Student Success Program (ISSP) and needs-based funding so that the ISSP is not at risk. The ISSP currently supports most salaries, services and operations of Indigenous student centres at universities and these need to be retained to ensure attainment goals for Indigenous students are properly supported and achieved.

[1] The Hon Jason Clare MP. (2024). ‘Responding to the Australian Universities Accord’, Media Release, 15 May. https://ministers.education.gov.au/clare/responding-australian-universities-accord