Australia's public universities face an uncertain year in 2012 when, for the first time, the government will lift the quotas it sets on the number of undergraduate students each can enrol. How this 'demand-driven' policy will play out is uncertain but it seems likely that in this and coming years, some universities will face significant enrolment increases while others will see their numbers fall away to an alarming extent.
Most universities decided last year to prepare for the new open-door policy by over-enrolling above the government-imposed limit, some by more than 20%.
Because the government has promised to pay the tuition costs for every Australian undergraduate a university enrols, many universities plan to use the extra numbers as a means of boosting their incomes and to counter the substantial fall-off that has occurred in foreign fee-paying students.
The demand-driven model
A review of the national higher education system in 2008, the Bradley Review, concluded that a demand-driven funding model was essential if Australia was to achieve higher education participation rates comparable with other OECD countries.
The report highlighted the large number of eligible young Australians who had failed to gain entry to a university - a number estimated at up to 40,000 over the past decade.
The report argued that a demand-driven system would eliminate this unmet demand and achieve a better match between students seeking a place and the actual number available.
It said that provided sound information and a strong quality assurance mechanism were present, the new system would lead to increased competition between universities and that this, in turn, would create greater diversity among them while improving the quality of the student experience.
The review committee also accepted that there could be difficulties for the government, including huge budgetary problems, if a demand-driven system was entirely open-ended.
In its initial response to the review, however, the government announced that as part of its 2009 budget it would provide an additional A$5.4 billion (US$5.5 billion) to support higher education and research over the following four years - with one goal being to improve access and outcomes for students from low socio-economic backgrounds, build new links between universities and disadvantaged schools, and reward institutions for meeting agreed quality and equity outcomes.
Subsequently, in an act setting out the new demand-driven system that was passed by both houses of parliament last September, the government included the proviso that the education minister would be able to specify an upper limit for total funding of undergraduate courses of study. Whether that situation will arise this year or at some future time is as uncertain as other consequences of the radical reform.
"Universities are mindful the legislation provides the minister with reserve powers to impose restrictions on enrolments in some disciplines if that is required," says Dr Glenn Withers, CEO of Universities Australia.
"We understand this is intended as a power of last resort for extraordinary circumstances, and also that the exercise of such powers would require passage of a 'disallowable instrument' in parliament.
"We would therefore expect that in the normal course of events any possibility of re-capping places in any discipline would most likely be averted and managed through sector-level consultation and-or through robust negotiations, as well as after considerable analysis and consultation with other relevant stakeholders. We would wish to see government also consult so as to establish principles that would govern the exercise of this power."
To counter fears that university campuses will overflow with students and that an inevitable decline in academic standards will occur as staff struggle to cope with the numbers, the government has also created a new regulatory framework and a new Tertiary Education Quality and Standards Agency to be responsible for ensuring standards are maintained.
Student fees
The Bradley report pointed to other difficulties a demand-driven system could face, including overcoming a mismatch between students wanting to enrol in certain courses likely to be more profitable on graduation and the requirements of the Australian workforce for high-skilled labour in less popular fields.
It did note that the government would still be required to meet the costs of a certain number of designated places in skills or disciplines considered critical for the nation but where student demand was low, such as mathematics, science and some modern languages.
In accepting the report's recommendations, the government decided to offer a fees discount to students undertaking mathematics and science courses. But, facing a financial downturn in November, the government announced that the discount would no longer apply - thereby imposing an additional cost to students this year totalling some $300 million.
In any case, all undergraduates will still be required to meet a significant proportion of the cost of their courses through Australia's higher education contribution scheme or HECS, now known as FEE-HELP. They can do this either by deferring repayments until they graduate and are earning a salary when a tax surcharge is applied or by paying the portion of the tuition fee not covered by the government on enrolment.
At present, fees vary widely between courses: law students, for example, have to pay 80% of their course costs while arts students contribute about half yet engineering, dentistry, medical and nursing students only pay around 30%.
A report by a government-commissioned inquiry into base funding of universities, released last month, proposed that all undergraduates should eventually pay 40% of course costs, with the government meeting the 60% remaining. How the government will respond to the latest report's recommendations is yet another unknown.
Meanwhile, Universities Australia says the demand-driven system should be accompanied by improved government funding per student, which has been shown to be some 33% below full cost for domestic undergraduates.
"Since the sources of cross-subsidy are vulnerable - for example, international student fees and commercial revenues - or needed for own-purposes in the national interest, such as research, the public contribution of universities to national productivity will suffer if below-cost growth extends too far," Withers says.
He agrees that some universities will expand more than others, depending on their individual missions, but says this is appropriate depending upon the various economies of scale and scope available to them.
"The key feature of the new system is the removal of formal caps on enrolments beyond the universities' own entry requirements. This means that overall expansion of the sector is supported so that there should be opportunities for all to benefit. If there is some diversion of student enrolments it will be occurring within a growth climate which allows new positioning to take place."
In a commentary on the new demand-driven system Paul Kniest, policy and research coordinator with the National Tertiary Education Union (NTEU), says the appropriate balance between flexibility and certainty could be achieved by giving universities "a band or envelope of places which would ensure each university a guaranteed minimum number of places by broad field of study".
Writing in the union journal Advocate, Kniest says introduction of the demand-driven funding system could undermine the certainty and confidence universities need to make important decisions.
"We are greatly concerned that universities will manage this uncertainty by increased use of casual staff, which will not only make our universities less attractive places to work, but will ultimately threaten their capacity to sustain the high quality of education and research for which they are internationally renowned," he says.
Most universities decided last year to prepare for the new open-door policy by over-enrolling above the government-imposed limit, some by more than 20%.
Because the government has promised to pay the tuition costs for every Australian undergraduate a university enrols, many universities plan to use the extra numbers as a means of boosting their incomes and to counter the substantial fall-off that has occurred in foreign fee-paying students.
The demand-driven model
A review of the national higher education system in 2008, the Bradley Review, concluded that a demand-driven funding model was essential if Australia was to achieve higher education participation rates comparable with other OECD countries.
The report highlighted the large number of eligible young Australians who had failed to gain entry to a university - a number estimated at up to 40,000 over the past decade.
The report argued that a demand-driven system would eliminate this unmet demand and achieve a better match between students seeking a place and the actual number available.
It said that provided sound information and a strong quality assurance mechanism were present, the new system would lead to increased competition between universities and that this, in turn, would create greater diversity among them while improving the quality of the student experience.
The review committee also accepted that there could be difficulties for the government, including huge budgetary problems, if a demand-driven system was entirely open-ended.
In its initial response to the review, however, the government announced that as part of its 2009 budget it would provide an additional A$5.4 billion (US$5.5 billion) to support higher education and research over the following four years - with one goal being to improve access and outcomes for students from low socio-economic backgrounds, build new links between universities and disadvantaged schools, and reward institutions for meeting agreed quality and equity outcomes.
Subsequently, in an act setting out the new demand-driven system that was passed by both houses of parliament last September, the government included the proviso that the education minister would be able to specify an upper limit for total funding of undergraduate courses of study. Whether that situation will arise this year or at some future time is as uncertain as other consequences of the radical reform.
"Universities are mindful the legislation provides the minister with reserve powers to impose restrictions on enrolments in some disciplines if that is required," says Dr Glenn Withers, CEO of Universities Australia.
"We understand this is intended as a power of last resort for extraordinary circumstances, and also that the exercise of such powers would require passage of a 'disallowable instrument' in parliament.
"We would therefore expect that in the normal course of events any possibility of re-capping places in any discipline would most likely be averted and managed through sector-level consultation and-or through robust negotiations, as well as after considerable analysis and consultation with other relevant stakeholders. We would wish to see government also consult so as to establish principles that would govern the exercise of this power."
To counter fears that university campuses will overflow with students and that an inevitable decline in academic standards will occur as staff struggle to cope with the numbers, the government has also created a new regulatory framework and a new Tertiary Education Quality and Standards Agency to be responsible for ensuring standards are maintained.
Student fees
The Bradley report pointed to other difficulties a demand-driven system could face, including overcoming a mismatch between students wanting to enrol in certain courses likely to be more profitable on graduation and the requirements of the Australian workforce for high-skilled labour in less popular fields.
It did note that the government would still be required to meet the costs of a certain number of designated places in skills or disciplines considered critical for the nation but where student demand was low, such as mathematics, science and some modern languages.
In accepting the report's recommendations, the government decided to offer a fees discount to students undertaking mathematics and science courses. But, facing a financial downturn in November, the government announced that the discount would no longer apply - thereby imposing an additional cost to students this year totalling some $300 million.
In any case, all undergraduates will still be required to meet a significant proportion of the cost of their courses through Australia's higher education contribution scheme or HECS, now known as FEE-HELP. They can do this either by deferring repayments until they graduate and are earning a salary when a tax surcharge is applied or by paying the portion of the tuition fee not covered by the government on enrolment.
At present, fees vary widely between courses: law students, for example, have to pay 80% of their course costs while arts students contribute about half yet engineering, dentistry, medical and nursing students only pay around 30%.
A report by a government-commissioned inquiry into base funding of universities, released last month, proposed that all undergraduates should eventually pay 40% of course costs, with the government meeting the 60% remaining. How the government will respond to the latest report's recommendations is yet another unknown.
Meanwhile, Universities Australia says the demand-driven system should be accompanied by improved government funding per student, which has been shown to be some 33% below full cost for domestic undergraduates.
"Since the sources of cross-subsidy are vulnerable - for example, international student fees and commercial revenues - or needed for own-purposes in the national interest, such as research, the public contribution of universities to national productivity will suffer if below-cost growth extends too far," Withers says.
He agrees that some universities will expand more than others, depending on their individual missions, but says this is appropriate depending upon the various economies of scale and scope available to them.
"The key feature of the new system is the removal of formal caps on enrolments beyond the universities' own entry requirements. This means that overall expansion of the sector is supported so that there should be opportunities for all to benefit. If there is some diversion of student enrolments it will be occurring within a growth climate which allows new positioning to take place."
In a commentary on the new demand-driven system Paul Kniest, policy and research coordinator with the National Tertiary Education Union (NTEU), says the appropriate balance between flexibility and certainty could be achieved by giving universities "a band or envelope of places which would ensure each university a guaranteed minimum number of places by broad field of study".
Writing in the union journal Advocate, Kniest says introduction of the demand-driven funding system could undermine the certainty and confidence universities need to make important decisions.
"We are greatly concerned that universities will manage this uncertainty by increased use of casual staff, which will not only make our universities less attractive places to work, but will ultimately threaten their capacity to sustain the high quality of education and research for which they are internationally renowned," he says.
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