Andrew Leigh

I spoke in parliament yesterday about the shift to a demand-driven university system.

Higher Education Support Amendment (Demand Driven Funding System and Other Measures) Bill 2011
21 June 2011

Productivity lies at the heart of raising Australian living standards. As US economist Paul Krugman once said, 'productivity isn't everything, but in the long run it is almost everything.' So the challenge in raising Australian living standards in the future is to crack the nut of higher productivity.

During the 1980s and the 1990s, tariff cuts, competition policy and enterprise bargaining were among the key policy drivers of raising productivity in Australia. Today, one of the policies most likely to boost the rate of productivity growth is education reform. Raising the human capital of the workforce is essential if we are to adapt to changes in the labour market. This agenda involves both raising the quantity of education—boosting the average number of years of schooling that each person receives—and boosting the quality of the school system.

Labour is focused on both of these agendas. We are keen to ensure that, as technological changes diffuse through the Australian economy, workers of the future are able to adapt and use those new technologies. In the case of schools, we want to create incentives for students, teachers and principals—the whole school community—to perform at their best. If we can do that, education reform will also be a great economic reform.

Part of this agenda also involves ensuring that Australian universities work as effectively as they can, that Australian universities serve more young people and that they do so as effectively and efficiently as we can ensure.

On coming to office, Prime Minister Gillard, as the then Minister for Education, commissioned the Bradley review to look into our higher education system. The Bradley review confirmed the need to boost student numbers in Australia. In the words of the review there was a 'decisive need for action' to boost numbers of qualified people in Australia. The report noted that, in 2003, 43 per cent of the young people in the United Kingdom aged between 18 and 30 participated in university and that, by 2020, Britain is hoping to have raised this number to 50 per cent. Ireland already has a participation rate of 55 per cent and is aiming for 72 per cent in 2020. But, by comparison, in the last years of the Howard government only 29 per cent of Australians aged between 25 and 34 had a bachelor's degree or above. This government has an unapologetically ambitious agenda in skills and training, and a critical part of that is ensuring that we boost university participation. By 2025, we hope to have 40 per cent of Australians aged between 25 and 34 years holding at least a bachelor's degree. This does not come at the cost of our trades. In fact, the two sectors complement one another. As the economy grows we will need more skilled workers across a whole range of skills.

We recognise that in the context of operating within our region we need to ensure that Australia's workers are well trained; that they have not only the skills for the jobs of today but the skills set that allows young Australians to engage in lifelong learning—to continue to adapt as technological change happens. One thing we can be sure about is that for a mechanic graduating now the cars of 30 years hence will not look much like the cars of today. For an engineer graduating today many of the engineering technologies of the future will not look like the engineering technologies of today. So we need to ensure that our education system encourages lifelong learning.

A demand driven model of university funding ensures that Australia is prepared for these opportunities. Rather than governments guessing at future labour market trends and determining numbers—a command and control approach—this government is uncapping university places. Undergraduate places will no longer have to be rationed. From 1 July universities will have the flexibility to set student numbers based on industry and employer needs.

The bill of course retains the ability for the government to respond to any new skills shortages and, if necessary, to the oversupply of graduates in particular areas. But we are responding to a key insight, which is that forecasting future labour market trends is difficult. I refer the House to a paper by the Centre for Independent Studies' Andrew Norton titled Mismatch: Australia's graduates and the job market. Andrew carefully takes the reader through a range of evidence on the poor quality of labour market forecasts. He points out that:

Some industries are cyclical. Civil engineers are in tight supply now, but during the early 1990s recession a construction downturn left 30% of recent graduates unemployed. In the late 1990s, the Australian IT industry argued that it faced severe shortages of workers. As it turned out, many IT professionals struggled to find work in the early 2000s.

The key problem with forecasting labour demand—working out from a central planner's point of view which industries are going to grow and which are going to shrink—is that often it is technology that is driving industry change. Because technology changes discontinuously—we cannot of course forecast the new innovations that are going to come in—we tend to be quite poor at forecasting the industries or occupations that will grow and those that will shrink.

I cannot say that the legislation before the House today will entirely satisfy all of the demands that my friend Andrew Norton would want, but I hope it goes at least some way to addressing his criticisms. He has very articulately set out his concerns about the mismatch between the graduates Australian universities produce and the labour market demand and the difficultly of predicting with precision supply and demand for graduates.

The bill also will require each university to enter into a mission based compact with the Commonwealth. Compacts provide assurance concerning the alignment of university missions with the Commonwealth's national goals in the areas of teaching, research and innovation. They do so in a way that recognises that the objectives of government and universities are often shared objectives. The government will continue to work cooperatively with higher education providers through compacts to ensure that individual university missions serve Australia well in teaching, research and innovation.

Consistent with the Bradley review's recommendations on demand driven funding, we are also abolishing the student learning entitlement. The student learning entitlement currently limits a person's ability to study at university as a Commonwealth supported student to the equivalent of seven years full-time study, subject to exceptions specified in the act, which allow for further periods of 'additional' SLE and 'lifelong' SLE to be allocated. The student learning entitlement has introduced an additional layer of red tape into an already complicated system and it trips up genuine students who have done nothing wrong. By abolishing it we are again going to help to free up universities and allow them to get on with the job of teaching the next generation of students and not miring them in difficult red tape.

We know that application of the SLE has resulted in instances of hardship for particular students. Take for example the instance of a student who completes a three-year undergraduate science degree and then wants to re-enrol in a six-year medical degree. In that case the student would exceed their SLE and no longer be eligible for a Commonwealth supported place. They would have to complete their degree as a full-fee-paying student. Is that what we really want? Is that what this House supports? Do we really want to say to science graduates: 'No, you cannot train as a doctor unless you are willing to pay full fees for part of your study'? I do not think that is what we want to say. That is why scrapping the SLE is good policy.

Increasingly, a degree will be necessary for people to access high-skill, high-wage jobs. We want to encourage people to pursue higher education rather than erect barriers to participating in the higher education sector. We particularly want to encourage those Australians who want to go back to university to add to their qualifications. We do not want them to be caught up in red tape.

The problems with the SLE have been recognised by those opposite. In July 2006, in a speech to the John Curtin Institute of Public Policy about university regulation, the member for Curtin described the student learning entitlement as 'red tape'. The member for Curtin also indicated that the Howard government was at that time, in 2006, considering its abolition. She said:

Turning to the ubiquitous issue of government red tape—I am happy to listen to sensible suggestions as to how I can remove impediments to diversity and increase flexibility. As a result of the AVCC 's report on red tape, I have agreed to consider the abolition of the Student Learning Entitlement, which measures a student's consumption of Commonwealth supported education.

But we are now in this extraordinary position where the coalition is fighting to defend a policy that the then coalition federal minister for education had handpicked to be scrapped. The student learning entitlement is a discredited rule dating back to 2003. It ties universities up in red tape and trips up genuine students who have done nothing wrong. Sadly, what we see today from the coalition in opposing the scrapping of the student learning entitlement, a measure which should enjoy bipartisan support, is what we are seeing across the board in other policies. It is one thing for the coalition to walk away from reforms that we have long championed and they have long opposed but, on an increasing number of issues, we are seeing the coalition rejecting coalition policies. We have seen it on climate change where, in 2007, the coalition went to the election supporting a price on carbon and are now opposing a price on carbon.

We have seen it in respect of fuel taxation. In 2003, the then Treasurer, Peter Costello, announced reform of LPG taxation, reform that we are now, after an eight-year phase-in period, implementing. But those opposite have now decided that they want to walk away from that reform. And we are seeing it with the student learning entitlement policy, which those opposite wanted scrapped in 2006 but are now pursuing the maintenance of. This Nelson-era piece of red tape should be abolished but, instead, it seems that the coalition want to tinker with it at the edges and add to the bureaucracy.

Australia's universities have long been required to divert resources to administer this costly and ineffective entitlement system. In a submission to the Productivity Commission, in 2009, they argued:

There is ... no policy objective being served by the SLE, and there are considerable savings that can be achieved from its removal. As the first students subject to the new arrangements will shortly be exhausting their SLE, it is particularly timely to solve this issue now to avoid problematic decisions having to be taken regarding upcoming enrolments.

It is extraordinary that, after almost four years of hearing nothing from the coalition on higher education, this is almost the first issue that they are prepared to take a stand on. Abolishing the student learning entitlement will free up universities and they will be able to get on with what they do best: teaching the next generation of students. Its removal has been supported by almost every higher education group in Australia: the National Tertiary Education Union, the National Union of Students, the Australian Medical Students' Association, the Australian Technology Network and the network of Innovative Research Universities. All of these organisations support scrapping the SLE. But the Liberal Party continue to block SLE reform.

By contrast, the government is getting on with the job of ensuring that more Australians can study at our universities and that those universities are doing as good a job as they can. This year we will fund more than 480,000 undergraduate places at public universities. With an anticipated four per cent growth, next year this figure will rise to over half a million places, a 20 per cent increase since 2008.

To fund this historic expansion of opportunity, the government has provided an additional $1.2 billion in this year's budget, bringing the total demand driven funding to $3.97 billion over successive budgets. I know this will be welcomed right across Australia, and possibly nowhere more welcomed than in my own electorate of Fraser where I am proud to have the University of Canberra, the Australian National University, the Australian Catholic University and UNSW@ADFA.

Finally, I want to say a few words about free intellectual inquiry. The bill will amend the Higher Education Support Act to promote free intellectual inquiry. It is an important principle, underpinning the provision of higher education in Australia. Free intellectual inquiry will become an object of the act. The government's funding arrangements should not be used to impede free intellectual inquiry. Universities will be required to have policies that uphold it in relation to learning, teaching and research. Naturally, most universities already have such policies and I know that they are all as keen as we are to support research and teaching environments that promote free intellectual inquiry.

By focusing our reform agenda on the neediest students, there is also another pay-off. I have spoken of education policy as great economic policy, but education policy is also the best social policy that we have ever developed. A great education is a first-class antipoverty vaccine. If you read biographies of people who grew up in disadvantage, so often a great education is what makes the difference. I commend the bill to the House.