MEDIA RELEASE

5 August 2012

Graduate winners should pay more

Most higher education students should pay more for their courses than they do, since the private benefit they gain from their degrees is so high, according to a new Grattan Institute report, Graduate Winners: Assessing the public and private benefits of higher education.

Higher education tuition subsidies will cost taxpayers around $7 billion by the middle of this decade, yet what the public gets for its investment is not clear, said Grattan Higher Education Program Director Andrew Norton.

“Graduates do well out of higher education. They have attractive jobs, above-average pay and status. They take interesting courses and enjoy student life,” Mr Norton said.

“Given these large benefits, and with the HELP student loan scheme in place, most students would take their courses regardless of the size of the subsidy.”

“Tuition subsidies therefore merely redistribute income to students and graduates. The general public – particularly those who do not go to university – are worse off.”

Graduate Winners proposes a new model for setting higher education spending. Tuition subsidies should only be paid when they create public benefits that would not otherwise be created.

For example, a public health course whose graduates produce clear public benefits should be subsidised if it would not otherwise attract enough students, Mr Norton said.

But a law course should not be subsidized when students, perceiving a large private benefit, would have taken it anyway.

Mr Norton said that fairness considerations did not justify tuition subsidies either. With the HELP scheme, there was no evidence that tuition charges deterred people from lower socioeconomic backgrounds from taking higher education.

A carefully managed reduction in tuition subsidies could yield savings of around $3 billion by 2016-17.

“Given the substantial private benefits of higher education, supporters of tuition subsidies need to explain why the public money would not be better spent elsewhere,” Mr Norton said.

 MEDIA RELEASE

Sunday 5 August 2012

Grattan Report – higher student fees but no increase to university investment

The Grattan Institute’s Report, Graduate Winners, will help to further stimulate much-needed discussion on a sustainable funding model for Australian universities but the proposal is unlikely to receive support from the broader community, according to Australia’s peak body representing the university sector.

“While there is logic in attempting to identify the respective public/private benefit, the fundamental flaw in the proposal is the application of a very narrow definition of public benefit,” said Belinda Robinson, Chief Executive of Universities Australia.

“What this report fails to acknowledge is the magnitude of the national return on public investment in universities, including increased productivity, a highly-skilled and educated workforce, the creation of industries and technology needed for long-term economic diversification and the human capacity for making much needed medical and scientific discoveries.

“All of these things are critical to Australia maintaining a strong economy and the maintenance of our future well-being,” Ms Robinson said.

“If the public benefits were as limited as the report suggests, governments in China, India, Malaysia, Korea, Singapore and elsewhere would not be accelerating massive investments in their higher education systems as drivers of economic growth.

“The policy proposes shifting the cost of a university education from government to students without increasing the overall university investment. In doing so it rejects repeated study findings of substantial under-investment in universities and the fact that Australia has one of the lowest levels of public investment in universities in the OECD.

“It also fails to address the urgent need expressed by industry, governments and, most recently, the Australian Workforce and Productivity Agency, for a substantial increase in the number of people with higher education qualifications.

“With Australian productivity recently ranked 50 out of 51 countries just ahead of Botswana, the demand for up-skilling greater than ever, and given the huge investments being made by our competitors in their own higher education systems, it is a strange time to be seeking to erect barriers to higher education,” Ms Robinson said.

The Report proposes a new public interest test for government investment in higher education that would see $3 billion (in 2016-17) being transferred from government to families and students.

“This would equate to at least an additional 50 per cent increase in student fees without there being any increase to the overall investment in Australia’s university system.

“Recent economic modelling shows that demand for high skilled jobs will be at 1.6 times the rate of lower skilled occupations by the next decade. These skills are needed to meet the demands of the resources boom, to reshape our declining manufacturing base and to build the industries of the future.

“Universities are at the centre of that task,” Ms Robinson concluded.