Interview on ABC Radio Sydney Breakfast with Robbie Buck 
Higher education reforms to drive better outcomes for both students and taxpayers; University leaders’ salaries

Robbie Buck: Last night the university sector found out what it’s going to get in the upcoming Federal Budget. Student fees are set to go up, by around 7.5 per cent by 2021. They’ll also be asked to repay their HECS loans sooner. At the moment students only need to start making payments after they hit the income threshold of around $55,000 a year. That will now drop – well will drop – to $42,000. As might be expected, not everybody’s happy with the proposed changes. Vice-Chancellors in particular have expressed dismay at funding cuts, also included in the package. 

So, to pitch it to you, the Federal Minister Simon Birmingham in the studio this morning. Good morning. 

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

Robbie Buck: Okay, tell us the rationale behind this. Obviously cuts to the university sector are going to be keenly felt. There is a sense amongst many who work in the sector that there have been many cuts over a long period of time. This is only going to cut deeper, isn’t it?

Simon Birmingham: Well Robbie, it’s not really the case. We’ve seen a significant growth in revenues to Australian universities. Reports and analysis we released yesterday, by Deloitte Access Economics, demonstrate that since 2009 per-student revenues have gone up in Australian universities. 

Robbie Buck: But where’s that money coming from in the main? 

Simon Birmingham: Well, mainly from taxpayers. 

Robbie Buck: Is it?

Simon Birmingham: So per-student revenues have gone up by about 15 per cent, university costs over that same timeframe per-student have gone up by about nine per cent. So, there’s been huge growth in per-student revenues relative to cost. That, of course, has come over a period in time when we’ve seen growth in student numbers of about 30 per cent in Australian universities. So, they’ve achieved enormous economies of scale from that phenomenal growth in students. And with the Federal Budget struggling under the weight of deficit that we inherited, we’re keen to make sure that everybody in a fair way makes a contribution towards repairing that budget. And we think the universities, having achieved those economies of scale from the enormous growth subsidised by taxpayers, are in a position to make a very modest contribution to that. All we’re seeking, on average across Australian universities, is about a 2.9 per cent efficiency dividend spread over a couple of years.

Robbie Buck: Is there going to be a risk with these – the fee increases – that you are going to marginalise some sections of the community that would otherwise go to university but won’t be able to afford it?

Simon Birmingham: Well again, the facts speak quite the opposite. That ever since the HECS scheme as it was – when probably you or I were at uni – and the HELP scheme as it’s now known, the student loan scheme we have in place was put in by the Hawke Government. We’ve only seen one trajectory in terms of student participation, and that’s up, and indeed the growth in student numbers since HECS came about has been around 130 per cent. The growth in students from lower socioeconomic backgrounds has been around 170 per cent. So, even with the fee model in place, we see students because they don’t have to pay a cent up front, they don’t pay any real interest on their student fees. People from all backgrounds recognise that you’re more likely to get a better job, more likely to have a higher income if you go to university, and for those reasons people keep taking that decision to enrol and to defer their fees under what is one of the world’s most generous student loan schemes.

Robbie Buck: Why the reduction in the threshold? Why are you asking students to pay their HECS fees back sooner, when they’re earning less?

Simon Birmingham: So the level of student debt that the Federal Government is carrying at present is now up to about $52 billion. And, on current estimates, around one-quarter of that may never be repaid. Now, of course if we’re to keep offering one of the world’s most generous student loan schemes into the future, we need to make sure that that is actually a sustainable student loans program. All we’re proposing is to lower the repayment threshold to $42,000, which is around 20 per cent above the minimum wage for somebody working full time, but importantly we’re only introducing a new 1 per cent threshold level of repayment. So the current level of repayment, if you hit the minimum threshold, is 2 per cent. At one per cent of $42,000 that means we’re asking somebody to pay back around $8 per week of their student loan. That’s a very modest, careful and measured level of repayment.

Robbie Buck: Okay, I guess the other aspect to this though – you were talking about the Deloitte report into education that you were presenting yesterday as part of the rationalisation for this – Deloitte also had another report that was presented to your government about the need for spending cuts and also for raising tax. But a part of that, a big part of that, was saying that we are going to be saddling the next generation with an excessive level of debt that they will have to pay off. Is this compounding that at all? Are we setting up the next generation to have levels of debt which are going to be unsustainable for them?

Simon Birmingham: Well that other Deloitte’s report that you’re talking about Robbie was, of course, the risk of if we don’t get the Federal Budget into better shape, the fact that the next generation of workers and taxpayers will face even higher taxes just to service the debts that government carries into the future. And a big part – a big part – of the deterioration in the Federal Budget over the last decade has been the huge increase in number of students going to university, and therefore the huge increase in the amount of subsidies and funds that taxpayers are contributing to Australian universities. Now, we want to …

Robbie Buck: [Interrupts] Do you think there are too many Australians going to university? 

Simon Birmingham: I don’t think there are too many Australians going to university but I do think – and this is why reforms aren’t just about how much students pay, or when they pay them or efficiency dividends for universities – we’ve also proposed opening up the numbers of places in one or two year courses at universities. So that unis can perhaps stream students that might be better placed doing a one or two year associate degree or diploma program, rather than shoving everybody into the bachelor level courses, which are the only places unis currently can offer on a demand driven basis. 

We also want to hold unis more accountable with a performance payment system to reward them more effectively, where they help students to complete, to get a job, to ensure they’re held more accountable things in the future. As well as putting in place a new per-student loading for people from low socioeconomic backgrounds, so unis can provide more targeted support for students they enrol from equity groups to make sure they successfully complete the degree. 

Robbie Buck: Alright. It appears that you have the vice-chancellors in your sights, as part of this campaign as we lead up to the next budget. We’re about to hear from Dr Michael Spence, who is the Vice-Chancellor for the University of Sydney. Is that the case?

Simon Birmingham: No, look the vice-chancellors are leading large, multimillion organisations, some of them attracting government funds of close to $1 billion per annum nowadays. They are, of course, meant to be our best and brightest minds and I trust they can work with us, that they can find efficacies in their universities to deal with the efficiency dividend we propose, and they can keep ensuring we have one of the world’s best higher education systems. 

Robbie Buck: Okay, we’ll see what the Vice-Chancellor has to say about it. Simon Birmingham, thanks very much for your time this morning.

Simon Birmingham: Thank you Robbie.