Interview on Sky News with Tom Connell
Topics: Higher education changes announced in MYEFO; Year in review

Tom Connell: Simon Birmingham, thanks very much for your time today. You’ve announced attempt three for university reform, some are calling it, is it fair to say these changes are not the ones you would have made if it weren’t for the Senate?

Simon Birmingham: Well Tom, of course, if we had had the chance we would have legislated what we announced in the Budget in May this year, but ultimately we have to live within our budget to make sure we stay on track to make sure we return the country to surplus and to balance the budget and universities have to live within their budgets as well. And so, defeated by the Senate, as it were, in terms of our previous reforms, we’ve now put in place an alternative proposal that still essentially applies an efficiency dividend on universities by other means, that still allows them to have autonomy and choices about who they enrol and across what courses but does, indeed, ask them to firstly, find efficiencies in savings because they’ve seen phenomenal growth in funding, some 71 per cent growth in the period since 2009; and secondly, allows them and encourages them and incentivises them to focus on improving student performance and outcomes. Because whilst student numbers have grown by some 33 per cent or so over the last few years, we’ve seen an increase also in non-completion rates and a decrease in short-term graduate employment. And so we really need to make sure that unis with record funding of some $17 billion, that’s grown astronomically, is applied more efficiently and used to make sure that the students they enrol are succeeding both at uni and after uni.

Tom Connell: Let’s get to this main change, the bulk of the saving, as you mentioned there this a freezing of the funding for the Commonwealth Grants Scheme at 2017 levels for the year 2018 and 2019. Now this was announced in mid-December, this is the same time offers are being sent out, is that enough time to adjust for next year?

Simon Birmingham: Well Tom, remember that in terms of budget impact, this actually has, for the Federal Government, some $500 billion of additional costs compared with what we announced in May this year. So for universities, the overall budget projection and expectations were indeed improved in MYEFO compared with what had been announced in the Budget. It’s still a record level of funding. The Commonwealth Grant Scheme is but one level of funding that goes into universities; there is also then the funding the government provides through the HELP – or HECS scheme, as many people remember it – that provides for payments of all of the student fees and student loans; there’s then research funding; there’s regional loading for regional universities; there’s the HEPPP scheme that’s targeted at students of disadvantage and from equity backgrounds. And so there’s a range of other funding streams which essentially are all growing into the future as well. So universities ought to be able to find efficiencies in their administration budgets and in terms of their marketing budgets and their advertising spends which have totalled some $1.7 billion over the last few years. We did research before the Budget this year, undertaken by Deloitte, that showed that per student, revenue had grown by 15 per cent over the last few years for universities but their cost base had only grown by some 9 per cent; all of which provides opportunity for them to find savings and for them to be able to continue to make and to make into the future enrolment decisions that are in the best interests of the nation, but also particularly focus on each individual student and their success while at uni and thereafter.

Tom Connell: I’m talking though as well about 2018, you mentioned that their better off compared to the Budget sure, but none of that had passed the Senate, and it clearly was going to. Are you saying they should have had their budgets for 2018 based on something that was totally marooned in the Senate?

Simon Birmingham: Well I think it would have been very wise for universities to expect and to budget according to what the Government had announced in the 2018 Budget- sorry, in the 2017 Budget. In the end, as I said before, governments have to live within our budgets and universities have to live within their budgets. Now, under the scheme Labor put in place, they’ve been able to write their own cheque for a number of years. We made it very clear that was going to have to be trimmed and to make sure that universities actually became more efficient and that some of the efficiencies that were available to them were paid back to taxpayers to help us repair the overall budget bottom line.

I’ve been clear for quite some time – since it became apparent that the reforms may not get through the Senate – that the Government would have to look at alternatives and that’s precisely what we’ve done. We’ve looked at alternatives, we’ve decided that in terms of the simplest way that, yes, is still a hit to the federal budget bottom line of some $500 million comes on top of a hit from earlier this year as well – all up, we’ve in fact increased the projected university budget by about $1.3 billion over the course of this year alone. So there’s much greater funding in higher education spending from the Commonwealth level at year’s end than there was at the start of the year and universities ought to make sure that their focus is on being efficient, living within their budget, but doing the best by their students to improve the decline in completion rates and to improve the decline in graduate employment outcomes.

Tom Connell: And we’ll get to that in a moment, I just want one more question on 2018. Obviously yes, there has been indications that the government is still trying to make a saving in this area. Did you make it clear to universities perhaps behind the scenes you need to have another plan for 2018? Did they get a bit more notice than obviously when we all found out for sure in MYEFO?

Simon Birmingham: Well as I said, I’ve been not just clear in private, but clear in public that the Government was going to have to reflect upon and look at alternatives, given the stalemate that occurred in the Senate. We want to make sure that there is certainty for universities going forward into the future, but also certainty in terms of meeting our budget expectations which are central, overall, to maintaining Australia’s AAA credit rating, which are central to the path back to budget surplus which we demonstrated again in terms of MYEFO over the course of last week. All of these elements are critical. Since the Labor Party was in government in 2012 and the 2013 budgets, there have been consistent attempts by different governments of Labor and Liberal – Gillard, Rudd, Abbott, Turnbull – to find a way to trim the growth in university costs in spending because it had escalated so rapidly. Now, ultimately Labor decided to backflip on their position and not actually pursue it once they lost the election; we have not been able to legislate through the Senate; this is about saying the uncertainty that’s existed for the last five years has to come to an end and actually just ensuring the Budget is locked in and delivered as it is projected to be now.

Tom Connell: Now turning to 2019, you want performance contingent growth of university places. The performance side, and you spoke about graduate outcomes before. Is the basic measurement here getting a job after a degree?

Simon Birmingham: Well I think that’s the ultimate central outcome but we’re not attempting to apply performance arrangements until 2020. What we’ve said is that from 2020, that stream of funding – the Commonwealth Grant Scheme stream of funding – will grow in aggregate according to population growth to make sure that we keep up with increasing demand, that universities will have to find efficiencies over the next couple of years as we had asked them to do in the Budget this year, then there’ll be growth potential for them to keep up with demand across the Australian population. As to how that growth will be allocated across universities will depend, of course, on different population pressures, but also upon performance. And performance can be measured in a number of ways: reducing attrition rates and non-completion rates is one element; improving student satisfaction is another; ultimately, improving graduate employment outcomes is the prime goal that we should all be hoping to see. But we’ll spend the next 12 months or so working with the university sector to make sure that we get those metrics right, that they’re clear, they’re transparent, they’re achievable for the universities; so that they can plan from 2020 onwards, knowing precisely how that will work.

Tom Connell: And obviously that’s a work in progress and we’ll see what comes out of it because it’s an interesting shift and a focus I’m sure some would applaud. What does it mean for example though if you go out and study an arts degree versus say a commerce degree, you might be more likely to get a job after the commerce degree. Is that a fair enough outcome of this performance emphasis?

Simon Birmingham: Well we do want to make sure that universities, back when they’re making decisions to enrol students, are making decisions that are, firstly, geared towards accepting students who have the capability to succeed in the course they’re enrolled. There’s no point dropping standards to a point where students are enrolled who are highly likely not to succeed; you want to make sure they can succeed and then that support is there for them to do so. But also, that you’re choosing to enrol numbers of students in disciplines according to what you would project in anticipated employment outcomes to basically be like; so that you don’t end up with vast numbers of students qualified in one area, with hopes, dreams, expectations in that area, but not finding that there are jobs at the end of the tunnel for that. So universities need to be very mindful in terms of the enrolment decisions they make and in terms of across the different disciplines or courses that students take; making sure that, so far as they can, they are meeting the evolving nature of the economy and meeting the ultimate role which is to help those students go on and succeed in life in terms of getting a job or getting a better job.

Tom Connell: So it’s about meeting the needs of the economy. Is it going to go specific to say universities, I mean it strikes me that you could have one course where a whole heap of people decide to go and do a gap year, well they don’t have a job for a year, is that something that is within these metrics?

Simon Birmingham: No, no. I mean, in the end the individual student’s decisions to take time off as part of their study and so on are not what we’re really looking for here. What we will talk to the universities about are the clearly, within their influence elements such as attrition rates and non-completion rates, such as student satisfaction and graduate outcomes. They’re the types of things that we already measure, that we have been measuring for a while, where we can see that since the demand-driven system was put in place in 2009 that the level of non-completions has grown, that the short-term employment outcomes for graduates has weakened and that these are the things that having seen 71 per cent growth in their revenue, 33 per cent growth in their student numbers, these are the things that we should rightly expect universities to focus in on and say: how do we make sure the students we’re enrolling are getting the best outcomes possible?

Tom Connell: There’s also obviously a focus on wanting to avoid bad debt within this sector. I think the figures are in the realm of $50 billion of debt and a quarter of that might never get repaid. When you look at that and what has been projected into the budget. Is there a possibility of that result getting a lot better and adding on to the budget bottom line or have all the estimates been made based on what you’re trying to get past here?

Simon Birmingham: Well the Budget estimates are made, of course, based on what we hope to have implemented, but without change, without change to the way the HELP-HECS scheme works, around one-quarter of that $50 billion will not be repaid. Now, we project that based on the types of changes that we’re putting forward, at least $2 billion – or thereabouts – additional repayment should be able to be achieved, or a reduction in the debt not expected to be repaid as the Budget projects it to be. So we’re certainly focused there on how do we make that student loan scheme more sustainable and of course there are two reasons to do that. One is, out of fairness to all Australian taxpayers, that debt not repaid by those who take on that debt is debt that the rest of the taxpaying population just has to wear and write off. But the other relates indeed to ensuring that future students are guaranteed access to what is one of the world’s best student loan schemes. You know, Australia offers a student loans program that ensures people go to uni without paying a cent upfront, they pay no real interest on the loan they take out and they don’t have to pay it back until levels that even under the changes we’re proposing are still more than twice that of some other comparable countries. So we have a very generous student loan scheme, we want to make sure that it’s sustainable for the future because that’s the great equity driver that ensures whatever your background, whatever your parents’ or your carers’ income or family circumstances, you’re able to go to uni without paying one cent up front and we have to make sure that continues to be viable into the future.

Tom Connell: We’ll see what the crossbench makes of some of the changes that do need that approval. I want to get to a couple of broader questions. Is it fair to say Simon Birmingham that 2017 for the government has been a pretty challenging one?

Simon Birmingham: Well it’s been a politically challenging year and I’m sure that you and many other political commentators will talk about the bumps along the way of the political year, but I would rather measure the year in terms of achievement and achievement in the way that it impacts upon all Australians and I think we finished the year having delivered jobs growth of around 1000 jobs a day. That’s some 360,000 Australians who have jobs at the end of this year in addition to the Australians who had jobs at the end of last year and that’s a really positive benchmark and, of course, it’s about turning that jobs and growth slogan that we took to the last election into an outcome that helps Australians.

We also finished the year with our trajectory towards bringing the budget back to balance and ensuring that we end the legacy of debt and deficit that Labor left us in better shape, that no longer are we putting day-to-day government costs on the credit card and our projected return to surplus is looking stronger than ever thanks to difficult decisions that we’ve taken, but indeed we’ve managed to keep working through Senate obstruction, Labor obstruction to actually get things done. And along the way we’ve achieved many other things.

In my portfolio, the reforms to child care and early education that were legislated at the start of the year will provide, come the middle of next year, huge extra support to the hardest working, lowest income Australian families to help them meet their child care bills, access early childhood education and be incentivised to get back into the work force and to work the number of hours and the days of the week that suit them without child care costs being an impediment to them doing so; along with, of course, school funding reforms that are putting some $25 billion of additional support into Australian schools, delivered according to the Gonski needs-based standards and principles that actually will ensure consistency of treatment by the Federal Government of school children across Australia regardless of ad hoc divisions like state borders, between different state government systems, or religious differences between different non-government systems, all are actually according to a single, consistent model of fairness.

Tom Connell: Alright and I know that was a big personal achievement, a difficult one in your portfolio, an achievement others would say of course a bit of barnacle removal along the way. Simon Birmingham thanks for your time and of course all of your time during 2017, all the best in your break and we’ll see you again in 2018.

Simon Birmingham: Well thank you, Tom. And to all Australians, a wonderful Christmas. Hopefully as many people as possible get to spend it with family, loved ones and indeed, a happy and safe holiday period and a wonderful 2018 for everybody.