Far-reaching reform of the funding model must begin now

By Vin Massaro

More university places are needed for people in the 18-24 year old mini baby boom.

It is becoming increasingly clear as we manage our way through the COVID-19 crisis that the higher education sector will not recover fully for some time and that it faces serious existential threats unless some planning starts now to ensure its viability.

This is not just another Virgin Airlines, owned by foreign investors looking for an unconditional government bailout. It is one of the country’s top export earners and the home of the research laboratories on which the country is relying to find a vaccine for the current virus.

And just to round things off, the threat to universities’ income and viability comes from the same international income that has propped up the nation’s research efforts because governments have not been prepared to pay the full cost of the research they have funded.

Universities have not been the sole beneficiaries of having such a large international contingent living in Australia for several years, because international students and their families have spent money on essential items such as rent, food and other services that are provided by Australian businesses, which in turn have recruited staff to service the demand.

The international student market is showing signs of failure because students cannot enter the country. In some cases, students remain enrolled and are being taught through distance learning. But the attractiveness of Australia for international students is the opportunity to learn where they can also experience life in a foreign country. Even if they were to remain enrolled as distance learners, it seems unlikely that they will be prepared to pay the fees they would have paid for an on-campus experience.

So a loss of this market will have far-reaching impacts, not only on universities but also on the economy as a whole because it represents $40bn in export earnings. It can be argued that universities should not have put themselves in a situation of such dependence on one source of income, and increasingly from one market. But governments have welcomed the creation of a big export earner and have been happy to reduce their expenditure, knowing any shortfall would be met by international student income. Indeed, for government it has been a particularly lucrative income earner because it is also the only major international exporter that has not needed government assistance to establish and survive.

Universities will remain crucial to the country’s economy, with a major role in its recovery, provided they are not so depleted as to ­become ineffective. In past recessions, they have been a place where young people could go for additional training in preparation for the eventual recovery. Graduates have been essential to those recoveries, as they will be to this one, if given the opportunity.

The government could therefore take the opportunity to create more places at universities to allow for the mini baby-boom that is upon us in the 18 to 24-year-old population that would normally be expecting to go to university, and to cater for the likely increasing number of unemployed youth who qualify for university entry. These measures will not replace international students but they will ease the pain while those ­markets are re-established in the coming three years, assuming they are still there.

One problem is the government has allowed for growth in university places only in line with growth in the 18 to 64-year-old population — far lower than linking it to the growth in the 18 to 24-year-old population, which is the more logical approach. This policy needs to be changed urgently to provide time for students to make decisions about what they want to do next year.

A second problem is that several universities that were financially stressed before this crisis could face financial failure, and decisions will need to be made about whether and how to save them. Any failures in regional areas will create a ripple effect in their communities, given they often represent the major employer and economic contributor to the communities they serve. Others will be metropolitan, but they too cannot be allowed to disappear if the nation is to educate the numbers of students it needs for its economic recovery. However, government has the capacity to impose conditions on any assistance it provides, or it could change the system and its funding levels so that it creates a new system that is affordable in the circumstances. This could be done by several means, including the rationalisation of the number of institutions and reducing the cost of delivery. It could create a hub-and-spoke system, with the hub having the full range of courses and research ­capacities while the institutions at the end of the spokes would be teaching institutions that send their research-oriented graduates to the hub for advanced studies.

It also could consider the creation of state university systems, with some universities in each state funded for teaching and research and others funded for teaching. The current model with funds allocated on the assumption that all staff are given time for research is not efficient because the output does not reflect the investment. This would free up funds to be used to fund research in large and focused research groups.

But these are matters for proper examination and debate. The crucial imperative for government and the sector now is to start thinking and planning for the post-COVID world of higher education and research. As with any planning exercise, this will need to begin with an analysis and articulation of the strengths and weaknesses of the current system, its efficiency and effectiveness, and its purpose. What does government want from its higher education system? If it is concerned about its over-reliance on international students, how much would its ideal system cost and is government willing to make the additional investment that will support the biomedical and other essential research that is now dependent on international fee income? What are the different scenarios that might confront the sector, and what sustainable models will protect and enhance it?

The task should be given to an independent expert group that is free to consider all options, however controversial or revolutionary, to ensure that the range of options from which governments can choose is as comprehensive and sustainable as possible. The group should be asked to provide advice on reforms that must be in place immediately, and those that can be staged over a longer period.

Re-imagining and adapting such a complex system will not be simple, but the task needs to be completed quickly if the more urgent proposals are to be ready for implementation next year. Waiting for the first signs of failure will leave too little time to act.

Professor Vin Massaro is a Professorial Fellow from the Melbourne Centre for the Study of Higher Education at The University of Melbourne.

First published in The Australian Wednesday 28 April 2020

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Professor Vin Massaro

vin.massaro@unimelb.edu.au