Andrew Leigh

I spoke in parliament yesterday about higher education reform.

Higher Education Support Amendment (2010 Budget Measures) Bill 2010

Second Reading

15 November 2010

I rise today to speak on the Higher Education Support Amendment (2010 Budget Measures) Bill 2010. This bill is about expanding universities and modernising Australia’s university system so that it is really fit for purpose to match the needs of the labour market of the next generation. Students graduating from Australian universities in 2010 are going to be entering a labour market which is fundamentally different from the labour market of their parents. It is important is that our universities provide them with the skills and opportunities necessary for this new and changing labour market.

There is a great Labor legacy of adapting the educational system to meet the needs of the Australian labour market. One of the key features of the first speeches on this side of the parliament has been the issue of education. Many, like myself, have spoken about the power of education to raise living standards throughout Australia. Many others have also spoken about the role that education plays in breaking the intergenerational poverty cycle. You need only to read a few autobiographies of kids from the wrong side of the tracks who have made it to see that consistent theme of a great education being Australia’s best leveller. I am proud today to rise in support of a bill which follows very much the education reforming legacies of the Chifley, Whitlam and Hawke governments, all of which brought about substantial expansions to Australia’s higher education system. The Rudd and Gillard governments have followed very much in that tradition.

I am very proud to have within my own electorate of Fraser a number of Australia’s great tertiary institutions. The Australian National University, the University of Canberra, the Australian Catholic University and UNSW at ADFA are just a few of the terrific institutions in my electorate. But it is important to remember, whenever we are talking about higher education, where we are today and where we could have been. In 1996 Australia ranked seventh out of OECD countries in terms of attainment of undergraduate or higher qualifications amongst 25- to 34-year-olds. By 2006 Australia had dropped to ninth position, according to the Bradley review. That is because other countries surpassed us in their share of young people who have attained a tertiary qualification. Countries such as Finland, Sweden and New Zealand have increasing tertiary participation at a faster rate than Australia and have set targets for tertiary participation of up to 50 per cent. The Bradley review noted that:

These policy decisions elsewhere place us at a great competitive disadvantage unless immediate action is taken.

One of the things that we saw under the former Howard government was an increase in student-staff ratios. Back in 1996 there were 15 students for every tertiary staff member. By 2006, which is the final year the Bradley review uses in its analysis, that number had risen to 20 to one. We saw a substantial increase in class sizes in universities over the period of the Howard government, and that is probably a contributor to low student satisfaction levels. According to the Bradley review, from 1996 to 2007 the levels of university graduates’ satisfaction on the good teaching, appropriate workload, clear goals and standards, and learning community scales remained either about or below 50 per cent for this whole period. In other words, at least half of Australia’s university students were dissatisfied with the quality of teaching they received, with workload, with goals and standards, and with their institutions as learning communities.

The Bradley review noted:

Australia is falling behind other countries in performance and investment in higher education.

So what this legislation does today is bring about critical changes in indexation. I am pleased today to be following on this side of the House the member for Robertson, who, like me, has had substantial experience in seeing how Australian tertiary institutions struggled to cope in the old environment. I have seen firsthand, as a professor at the Australian National University, the tough decisions that have to be made when wages increase substantially faster than Commonwealth indexation. That gap between wage growth and Commonwealth indexation means that universities have to make tough choices. The more wages outstripped funding the more we had to cut positions, forcing young researchers who were doing terrific work at the frontiers of their fields to go and find jobs elsewhere. That was good perhaps for the institutions that snapped them up but bad in the long run for students and for the research being carried out by our Australian tertiary institutions.

The Bradley review noted that:

… Commonwealth funding per subsidised student in 2008 was about 10 per cent lower in real terms than it was in 1996 … This was the result of a combination of direct cuts, constrained indexation and shifting of the balance towards higher student contributions.

That steady reduction in real Commonwealth funding had dramatic and painful impacts on Australia’s tertiary institutions. I am pleased to note that the bill that we are speaking to today responds to a recommendation of the Bradley review. Specifically it responds to recommendation 27 by implementing a new indexation arrangement to ensure that universities’ revenue does not continually decline. As the Bradley review said, there are ‘increased sources of non-government revenues that universities have developed since 1996’ and ‘those sources of revenue cannot viably be increased at historical rates’. That is a recognition that some of those substantial shifts that we have seen in the tertiary education sector over the last 20 years are one-off shifts. It is not reasonable to assume that they are going to occur again.

So the indexation factor within this bill is going to be determined through a combination of two sources. Three-quarters of the indexation factor will be derived from the Professional, Scientific And Technical Services Labour Price Index, which will be discounted by 10 per cent, as recommended by the Bradley review, to ‘require higher education institutions to pursue ongoing productivity gains’. That is not putting in place an unreasonable funding gap but is recognising that a 10 per cent difference is something that can encourage productivity enhancements within higher education institutions. The other quarter of the indexation factor will derive from the CPI to account for the non-salary component of the higher education index factor. That reflects the fact that not all of tertiary education funding is going to staff; something in the order of a quarter is going to capital funding and so the CPI is an appropriate indexation for that portion. The university sector has welcomed the improved indexation formula. As a result, the indexation is going to increase funding for the Commonwealth Grant Scheme, other grants and the Commonwealth scholarships.

The legislation that we are debating today is part of a long economic and educational legacy of successive reforming Labor administrations. One of the reforms of which I am most proud was the HECS reforms put in place in 1989 and now known as the HELP scheme. I would like to use this opportunity to pay tribute to my former colleague at the Australian National University Professor Bruce Chapman for his integral role in putting in place what I will probably always refer to as HECS.

The key to HECS was to recognise that a university education raises private incomes. My own work as an economist has looked at the quantum of that increase. It is in the order of a 50 per cent increase in take-home pay for a university graduate compared to somebody who has just finished high school with no further qualifications. It is fair, and it is in accordance with basic Australian principles of egalitarianism, that students who graduate from universities should make a contribution. But it is also critical to make sure that as students make that contribution it does not stop them attending university. They only make that contribution under the income contingent loan scheme when their earnings pass a certain threshold, set at around average earnings.

Recognising that a university education has a social benefit, the income contingent loan does not cover the full cost of tuition. We recognise that we as a society are better off from rising tertiary attendance rates and so we, in the form of the government, kick in a portion of the bill to allow students to attend university. There has been some careful research done on the impact of HECS on the socioeconomic mix of students who attend university. In particular, I am thinking here of a paper by Bruce Chapman and Chris Ryan which showed that the introduction of HECS in 1989 had no impact on the socioeconomic mix of university students. The number of low-SES students attending university increased because we saw, thanks to HECS, a substantial rise in the number of university students across Australia. But the share of university students who were from low SES backgrounds stayed unchanged. So I regard HECS in that sense as a pro-poor measure and a measure which increased equality of opportunity across Australia.

This next stage of reforms follows very much in the same tradition. Under the student centred funding system, the government will fund a Commonwealth supported place for every eligible university student accepted into an eligible course at a public university—a substantial shift in our higher education system and one that I am delighted to hear that those opposite support. They were not, alas, able to bring it home during their 11½ years in government, but I am glad to hear that they are supporting it now that a Labor government is putting it into place.

This will be a reform which recognises that the labour market of, say, 2050 is going to be one which increasingly requires high levels of abstract thinking skills and where we will naturally want to increase the number of young Australians who have a tertiary qualification. It is estimated, as the member for Kooyong has noted, that there will be an additional 115,000 Commonwealth supported places over the period 2010-2013. That is 115,000 young Australians who would not otherwise have got a chance to go to university but for this bill. That is a terrific thing and one of which all members of this House should be greatly proud.

Finally, I would like to use this moment to acknowledge Peter Davidson of the National Tertiary Education Union. Peter, a fierce advocate of better universities, alas passed away on 29 October of this year. I extend my condolences to his family and in particular to his widow, Tanya. I also use this opportunity to thank Emily Murray, a volunteer in my office, who has been a tremendous help in preparing my remarks today. I commend the bill to the House.