Interview on ABC Radio National Breakfast with Fran Kelly 
Higher education reforms to drive better outcomes for both students and taxpayers

Fran Kelly: And as we’ve been hearing this morning, students will bear the brunt of the Federal Government’s latest bid to reduce university funding. Course fees will rise by seven and a half per cent and graduates will be forced to start repaying their HECS or HELP debts when they earn $42,000 a year, which is not much more above the minimum wage. This package will also see universities hit with a two and a half per cent efficiency dividend, saving the Budget all up just under $3 billion. 

Professor Margaret Gardner, the vice chancellor of Australia’s largest uni, that’s Monash Uni in Melbourne, says government funding has already been cut by almost $4 billion in recent years.

Margaret Gardner: The universities are important to jobs, growth, ideas for the future, and they constitute Australia’s third largest export industry. If you think all these things are important for the future of Australia, I think it would be a priority not to cut them further. 

[End of excerpt]

Fran Kelly: That’s Professor Margaret Gardner from Monash University, questioning the Government’s priorities when she spoke to us earlier on Breakfast. Well, the Minister for Education joins us now. Simon Birmingham, welcome to Breakfast.

Simon Birmingham: Good morning Fran, great to be with you. 

Fran Kelly: We just heard there from Margaret Gardner, the vice chancellor of Monash Uni, about the contributions made to the economy. Jobs, growth, the export sector. Hitting the tertiary sector with further cuts, making students pay higher fees, isn’t this at odds with the Government’s mantra on innovation, jobs, you know, turning, skilling for the future, knowledge economy and all that – the priorities of Malcolm Turnbull’s government? 

Simon Birmingham: Well Fran, universities are receiving record levels of funding right now. The idea that …

Fran Kelly: [Interrupts] They’re educating record numbers of students. 

Simon Birmingham: And they are educating record numbers of students, and indeed the fees they’re receiving per student and their revenue per student, has gone up around 15 per cent since 2009, whilst their costs have only gone up around nine and a half per cent. Universities are absolutely critical to the nation’s future, and we recognise that. And that in part is why, in this comprehensive reform package we’re putting forward, we want to see a performance system in place to inspire and ensure excellence across our universities. That’s why we’re expanding access in areas of sub-bachelor places, but it also all has to be financially sustainable for the long-term and making sure, in particular, that our most generous student loan scheme is there for future generations, which means that it all, the access, the access to the student loan scheme, the access to uncapped places, all needs to be financially sustainable for this and future governments and future students. 

Fran Kelly: And I will come back to the performance system that you’re putting in place. I notice that Michael Spence from Sydney University welcomed that. But, if university funding is at record levels, as you say, and you talk about that 15 per cent revenue compared to course costs of nine and a half per cent, the universities say that doesn’t include the cost of around research, it doesn’t include maintaining infrastructure, which they are obliged to do, are you saying that our unis have become bloated?

Simon Birmingham: I’m not saying they’re bloated. I’m saying that as student numbers have gone up by more than 30 per cent since 2009 as you acknowledged, Fran, they’ve managed to achieve efficiencies of scale, and that’s great, and that’s a very good thing, and they’ve reinvested that in a range of ways. But of course, over time, when taxpayers are trying to deal with a Budget deficit challenge, it is not unreasonable to expect taxpayer-funded institutions, if they’ve become more efficient, if they are running more effectively, to make a contribution back to deal with those budget pressures. Ultimately, universities are largely funded by the Australian taxpayer. They’ve grown enormously over the recent period of time 

Fran Kelly: [Interrupts] Just on that, Margaret Gardner made the point earlier, that a good slice of their funding comes not from the Australian taxpayer, but from international students, which the universities are responsible for going out and getting. 

Simon Birmingham: And that’s been another great thing that Australian universities have done, and yes that has helped them in a whole range of different ways, but that’s not of course to ignore the fact that a 30 per cent plus increase in student numbers, where they are funded per student and where we have the research that shows they’ve managed to achieve those economies of scale as a result of that, that’s a pretty clear argument as to why it is, I think, they can absorb what is on average an efficiency dividend of about 2.9 per cent for universities spread over a couple of years. 

Fran Kelly: They feel differently and last night, when you briefed the vice chancellors, I understand several asked you why the Government wants to give business a $50 billion tax cut while they’re getting a funding cut. It seems like a fair question given universities too are big employers. They’re our third biggest export sector.

Simon Birmingham: Well, one did ask me that question and I gave a very direct answer, which is that, the most important thing to university graduates is finding a job, is ensuring we have a strong economy with levels of investment that will ensure there are good, high-paying, high quality jobs there, and the enterprise tax plan reforms of the Turnbull Government are about making us a more competitive country in which to invest 

Fran Kelly: [interrupts] But so is education. I mean, higher education will build a more productive economy and will build jobs.

Simon Birmingham: And that’s why we’ll continue to invest in higher education at a record level, but global capital is, of course, subject to global movements nowadays, and if we look at the UK, the US, New Zealand; countries that have or are lowering their company tax rates, Australia needs to remain competitive with those countries, or today’s graduates wont have jobs. Tomorrow’s universities won’t actually be in a circumstance where they can partner with major industry and businesses based in Australia because those businesses won’t be based in Australia. So, this is about government getting the balance right, when to company tax cuts, it’s about getting businesses jobs here in Australia so that universities have businesses to partner with, students have jobs that they can get at the end of their degrees, diplomas or associate degrees. 

Fran Kelly: Let’s talk about getting the balance right, because the reworking of your funding formula will mean than students will be paying 46 per cent of their course costs, up from 42 per cent, and the Commonwealth burden falls to 54 per cent. Student fees will rise by seven and a half per cent. Fees will increase by a maximum of $3600 over a four-year course. Have you looked at the numbers to see whether that lift in fees, that lift in debt, is doing to dissuade some school leavers from entering universities?

Simon Birmingham: Well, since the HECS system was introduced by the Hawke Government, and through subsequent changes various governments, we’ve only seen one trajectory of student participation, and that’s been up. So, fees that have been applied haven’t deterred people from enrolling. In fact, student numbers over that time have grown by about 130 per cent, and for students from disadvantaged backgrounds, they’ve grown by around 170 per cent. Why is that? It’s because we have one of the most generous student loan schemes in the world, where nobody pays one cent up front to go to university, they face no interest in real terms on the debt that they take on. They don’t repay it back until a higher salary. This is an incredibly good and generous student loan scheme that our reforms are designed to preserve, to ensure that future generations can access the same level of generosity that I and today’s students, and those in between, have managed to access as well. 

Fran Kelly: Not so generous in the payback now, though? They’re going to have to start paying back at $42,000. That’s only $7000 higher than the minimum wage. It’s not very generous. We’ve got a lot of texts from listeners saying that is onerous. It’s all very well to say it’s $8 a week with three cups of coffee or whatever it is. But, you know, students aren’t earning much and $42,000 a year living in a major city – that’s going to make major difference. 

Simon Birmingham:  The student loan scheme currently has a debt that the Government is carrying of about $52 billion and on current estimates around one quarter of that won’t be repaid. The last thing I want to do is to see a future minister in my shoes, in a position where they say this loan scheme is no longer affordable and actually go back to a period where students face upfront fees or imposts or impediments to get to university. 
You have to make sure the scheme …

Fran Kelly: Yeah, but it’s not the students fault it’s unaffordable. Who’s fault is it? I mean a lot of the debt, this- the $42 billion over a decade, a quarter of which is unlikely to be paid. I understand a lot of that debt was triggered by the Government’s disastrous vocational student loan system. So, it’s not the students fault. It’s the Government’s fault. 

Simon Birmingham:  Fran, a portion of it. And of course I as Minister have already closed down Labor’s VET fee-help scheme, put in place a much more …

Fran Kelly: [interrupts] Both Governments let it go on too long…

Simon Birmingham: … targeted, modest arrangement. So, we’ve addressed and fixed that problem. But that doesn’t negate the fact that with the huge increase in student participation in universities, there is also a pressure from the university side, the higher education side, in relation to student debt. As you rightly highlighted, the proposed new threshold of $42,000 also comes with a new repayment rate of just one per cent, which equates to about $8 a week, and is still incredibly generous by global standards. You know, across the ditch in New Zealand, students start re-paying their debt at $19,000. We’re proposing $42,000 – more than twice that here in Australia. 

Fran Kelly: Yeah, it might be generous compared to New Zealand, but it’s still an $8 increase.

Simon Birmingham:  It’s generous compared to the UK. It’s generous compared to the US. It’s generous by global standards. 

Fran Kelly: Well think about this, a worker on $120,000 a year is paying back $229 a week under your scheme. That’s a lot of money. I mean, we’ve got Claire in Melbourne has texted us. She says that at my daughter’s uni a science degree is around $30,000. Most students with a general degree also have to pay for post-grad studies. Many places are not government subsidised. A place in a Master’s of physiotherapy is $120,000. Try finishing uni a $150,000 debt? It’s a big debt.  

Simon Birmingham: Well, Fran, let’s take a science degree. Let’s take a science degree. A science degree, taxpayers provide subsidies in Commonwealth grants to universities to the tune of $52,800 under our plans for a science degree. The student, the student will incur a held debt – assuming they put it on the government-funded credit card and don’t pay any upfront fees – of $28,100. So, the taxpayer subsidy is well over half. In fact, it’s about two-thirds or so of what it is that a student contributes to their degree. A student though still has, for university graduates, employment benefits compared to the rest of the taxpaying population.

Fran Kelly: [Interrupts] Not if they’re earning $42,000 a year they’re not. 

Simon Birmingham: Most students will get a job faster than a non-graduate and will get a higher income than a non-graduate. That’s what this data shows and of course that’s why we have in place a scheme that ensures there’s no barrier of entry to higher education for students, but ultimately asks them because they get benefits that non-university graduates don’t on average get, ask them to make a contribution back. 

Fran Kelly: Federal Education Minister Simon Birmingham is our guest. On that most graduates getting a job, there is data showing that there’s more and more graduates unemployed and you’re looking at the Government’s- universities’ performance systems and linking them to a range of benchmarks, including employment outcomes. What is the problem you are trying to address here? Are too many students doing degrees where there are no jobs? Or there is too many people in them? Is there is a mis-match between what the universities are offering and the job market?

Simon Birmingham: So Fran, we have at present what’s called the demand driven system where universities are able to enrol as many students as they want in what ever courses and disciplines they choose to enrol them in, without any level of government interference. We just pay on the number of students that they enrol. 

Fran Kelly: Because we want a higher educated population? 

Simon Birmingham: Because we want to make sure that the system is responsive to economic needs and the future demands of our labour force. But, what I want to make sure is that there is a degree of accountability that comes with that. And so the proposed performance pool that we want to put in place is about ensuring that universities when they are making enrolment decisions are successfully enrolling students who they support to complete, to graduate, and to ultimately get a job. And we’ll work through with the university sector in a very collaborative way the type of benchmarks that we can put in place that ensure taxpayers and the public can have confidence that universities, who get such autonomy in the way they operate, are held to high performance standards too.

Fran Kelly: Minister, thank you very much for joining us. 

Simon Birmingham: Thank you, Fran. 

Fran Kelly: Simon Birmingham is the Federal Minister for Education and Training.