Peter Beattie: And tonight we’ve got the Education Minister Simon Birmingham, and he’s in Canberra, and as we all know, this is one of the most important portfolios in government. So Simon, thank you very much for joining us. Could I ask you a really important fundamental question that every mum and dad wants to know? You made a speech recently, which I thought was a good speech, where you talk about over the last 10 years the GDP had increased by 66 per cent, yet Commonwealth funding to public institutions, places, had increased by 116 per cent. Now, living within our means means that the funding from the Commonwealth is well below the increases in GDP. How do we fund our education system; where will the money come from, Simon?

Simon Birmingham: Well Beattie, you are right that- and thanks for having me on, guys. It’s good to be with you, I should say at the outset. But you are right that funding for universities has grown over the last 10 years at about twice the rate of the economy. That’s fabulous in terms of the increased access that’s provided for more students into universities, it’s good in terms of the capacity that it’s built within a number of our universities, but it’s not a sustainable rate of growth that our budget, that’s already $36 billion in deficit, can continue to deal with indefinitely into the future. So we do have to really look at how we get value for money out of our education system and get the best outcome from the money we’re spending, and it’s record sums of money. Whether you’re looking in schools or universities or early learning and child care, at every level we’re spending record funds in real terms, taking inflation and so on into account.

So what I’m really passionate about, and what we are looking at as a government, is how we get better value for money, quality outcomes from our universities in terms of students. And that really means putting a focus on transparency of outcomes for students so we know what it takes to get into university, admission standards, and what it is that you can expect from a course in terms of employment outcomes, and really lifting that transparency to get a more informed market for students going in. Investment in our research, equally critical in universities, and the National Innovation and Science Agenda has put really a decade of certainty around a lot of our research infrastructure to give universities the confidence of investing and planning there. But we do have to find savings in these portfolio areas, and I’m very open about that and that is what we’re working through in the context of this budget, and we’ll certainly be giving certainty to universities, mums and dads, and students about the way in which we fund universities in the future so that we do get this cost growth under control.

Peter Beattie: One quick thing if I could – de-regulation. Now, when that came in I actually supported the Government’s position because I felt the universities needed money. Now, I’m not silly; I know we’re heading into an election campaign, I know how difficult that issue is, and I know you’re not going to give me an answer tonight, I’m not stupid Simon. But in the end, universities do need to have some extra funding, and all the universities came out and supported de-regulation, except one, as a funding source.

Simon Birmingham: And look, two real principles that drive my thinking around de-regulation and the debate that’s there: firstly, equity of access. Making sure that we guarantee no student has to pay a dollar up front, that we preserve the viability of our generous student loan scheme – which is one of the most generous student loan schemes in the world – so that anybody from any background can get into university. But of course, it also has to be viable, and therefore we have to see those loans repaid over time so that it doesn’t blow out and ultimately break down as a system.

But secondly, not just about more money for universities, but about the incentives that the funding scheme creates for universities. And having a model where every university gets paid the exact same amount for the students they have in different courses just drives them all into the same sort of business model, and so we’ve seen them all grow enrolments in the same subject areas, and basically they’re the subject areas where they know they can make a profit out of teaching those courses. Well we shouldn’t be having universities enrolling people just because they can make a profit, we should be having universities enrolling students because that’s where the jobs are, and we should be having them enrolling them and structuring their courses and their fees in a manner that encourages innovation excellence amongst those universities.

And they’re the types of ways in which I’m looking at that question of de-regulation, and how we get the balance right to give confidence to students, to mums and dads and teachers at schools that kids who can should go onto to university, but to change the incentive profile for our universities so that more of them are encouraged to differentiate from one another, to innovate and to pursue courses that are outstanding from the rest of the pack.

Peter Reith: So money’s the issue isn’t it, really? Left, right and centre for you, Simon. You’ve got a hell of a lot on your plate. I mean, another one that came out today was the Parliamentary Budget Office, and the likelihood of a huge lift up of liabilities for the Commonwealth for those people who are- well what are they doing, are they skipping paying their due amount, or what’s happening? Are you going to have any trouble getting changes through the Senate to do something about the money? I think we ought to be worried about that.

Simon Birmingham: Yeah, so Peter you’re talking about the HELP scheme, that people of my generation remember as the HECS scheme, which provides, as I said before, the world’s most generous student loan for people going into university. It was expanded quite dramatically by the Gillard and Rudd governments into the vocational education and training sector as well, and quite disastrously in a number of those areas. And the projections are that the value of those loans, but more importantly the debt that is not expected to be repaid to the Federal Government, will blow out quite dramatically over the next 10 years.

There are a few factors in that. There is a cost factor that’s built in there from the de-regulation policies we were just talking about, and which I’m reviewing and having a look at alternatives to. There are also costs from the demand-driven system of letting universities enrol as many students as they want, and that’s where the type of incentives I was talking about come into play. That rather than them just being driven to get essentially more bums on seats, we actually want universities to be thinking about the quality of output for the students, and to be discerning in the way in which they’re enrolling and the numbers they’re enrolling.

And then there’s a big growth factor built in from the disastrous VET FEE-HELP program, which we’ve already put a freeze on this year, which is not actually reflected in those PBO numbers. And from that freeze we’ve also committed to completely re-write the VET FEE-HELP scheme next year so we no longer have dodgy, shonky operators writing loans for courses that are never completed.

Peter Reith: Well, just a simple question, I mean a lot of money is involved in this; have you got any idea from the Labor Party if they’d be prepared to use their numbers, if they have the numbers after the election, to actually fix this problem? Because let’s face it, they’re part of the problem. But seriously Simon, I think people are entitled to know if the Labor Party is prepared to be responsible, particularly when they were part of the problem.

Simon Birmingham: Look, in terms of VET FEE-HELP there’s commentary from the Labor Party that they might support some changes there. Give them credit in one space. In terms of the growth in costs in the university sector, the Labor Party has opposed everything essentially that we’ve proposed, have only said that what they will do is pretty much keep funding as the model currently is.

Now, we talked at the start there about the fact that costs have been growing at twice the rate of economic growth, and that’s just not sustainable. But look, we will go through this election campaign being very open and honest with the Australian people, and that means that I suspect we will be open about the reality that we are proposing to spend less than Labor, but I hope and trust it will be with reforms in place to demonstrate how we will spend it more wisely. And at the end of the day, if we have won the election we’ll have a mandate for our reforms, and I hope then that we can actually get far more progress in the next term of parliament than we’ve seen in this one.

Peter Reith: But they’re giving you trouble too on child care. I mean, what’s the story there? Because you had the means to fund that and they’ve done everything to stop it, so what’s going to happen on that school?

Simon Birmingham: Well Labor’s blocked the savings measures for child care reform, and that’s really disappointing. We want to reform the child care system, which would put an extra $3 billion into child care and early learning funding. But most importantly, for low and middle income Australians going to work they would be around $1500 a year better off in their child care costs under our reforms. Now, we wanted to pay for that through changes to the Family Tax Benefit scheme, which would of course be in some ways a realignment of those sorts of welfare and support payments, but it would be a realignment to help families who are earning the least in the workforce, who are most reliant on child care support. And of course, in true Labor Party fashion, they’ve blocked the savings, but say we should proceed with the spending. Well that’s just not viable for us.

We came up with savings measures, they’re difficult measures of course, but we think when you put it together with the child care package it’s rewarding and encouraging workforce participation. It’s helping those who work the longest hours to access the greatest hours of child care, those who earn the least to access the greatest level of subsidy for their child care costs, and means that families earning between $65,000 and $150,000 would be around on average $1500 a week better off in their child care costs. And I know plenty of parents around Australia who would like to see that, and would far rather see that sort of support for the costs they face, and to encourage them and help them in their workforce participation and in balancing work and family life, than in worrying about welfare payments like the Family Tax Benefit.

Peter Beattie: Simon, one of the other issues, of course, that fits within your portfolio is innovation. And that partnership between universities and research, and commercialising that research, turning it into jobs and companies, is going to be one of the growth sectors for Australia. In fact, it’s part of the transition that the Prime Minister talks about, and Bill Shorten who, to be fair, talks about this transition from mining to the new knowledge economy. Now, I know you’ve got a program where you’ve got $127 million allocated towards the business community to get them to partner with universities and research.

I’ve got two questions: one, how will that work? And the second thing is the whole issue about venture capital. It’s one of the big problems in Australia, we don’t have enough of it. So how are we going to- it’s all very well to talk about innovation and research and creating jobs, this is where the jobs will come from for the future. So how do we get that 127 million, how does that work, and then how do we get more money into innovation so Australian research can be turned into jobs in Australia?

Simon Birmingham: Yeah. So the money you’re talking about, Peter, is actually a lift in funding for research activities through our universities, but it’s a lift in funding to help with a transition in the way that research funding is actually distributed. So we’re taking currently six different research streams that spend several billion dollars through the Australian Research Council, and actually bring that into two streams that reduce the emphasis on publications as an output from universities, and will increase the emphasis on collaboration and actually make it easier for business to engage with unis. So not just in terms of what the funding incentives are, but the way that engagement occurs. So rather than having a fixed annual grant round that means a business who wants to work with a uni has to wait until the government says applications are open now, we’ll be putting in place arrangements where the Australian Research Council receives rolling applications from universities partnering with industry, so that we can get on with the job of backing those projects nice and quick in terms of getting them off the ground when they’re ready to go for that research activity. So that’s one end of the spectrum, and it’s really important we do get that collaboration happening because Australia is ranked as one of the best countries in the world for our research output, and yet one of the poorest countries amongst OECD or developed countries for commercialising it with collaboration and so on. So that’s the change we’re trying to shift.

To the venture capital question, we are proposing through the Innovation and Science Agenda some changes to the way in which tax arrangement occur to try to better encourage venture capital and investment in start-ups. And it’s a stark contrast here in the tax policies of the Coalition and the Labor Party. We’re proposing incentives that would lower the capital gains tax rate and provide reductions from that for start-up businesses over the first 10 years of investment, so that you actually have real incentive to put money into a start-up, and from that you know you’re going to have a tax break if that start-up gets off the ground and is a success. Labor, as we know, are proposing to actually reduce discounts around capital gains tax, which will make it harder to invest. So we want to create greater incentive to invest, particularly targeted into those start-ups to encourage more venture capital to support them, which is in contrast to tax hikes on the other side.

Peter Beattie: Simon, we’ve got one more question before we go to a break, and thank you again for your time. One of the things that has always worried me about taking students from overseas, particularly with the changes that are taking place in China and India, would you see it as almost like a cargo cult? We’ll take their students, educate them, do very well, but we seem to be missing the point that China is building up its own universities and eventually its universities will go to the world. So we can’t in the long term rely – and I think some of our universities are missing this point – we can’t rely indefinitely on these students coming here. So we have to make a transition, it seems to me, to joint degrees, joint campuses maybe. Do you think our universities are ready for what’s going to happen, the changes that will come out of China?

Simon Birmingham: Some of them are. Some of them are engaging really well with China and with other nations, and others are probably still a little flatfooted in that regard. Some are really embracing new technologies in the way they deliver their courses, and others doing not so well. I’ve certainly given the university sector a clear message in terms of my opinion, and that is that the battle will not just be for international students as the years go by: the battle will increasingly be for domestic students as well, because Australian kids will have more choices around the world that they can pursue. And so our unis have really got to focus on excellence, on innovation, the types of things I was talking about before to make sure they’re ahead of the game in that regard.

Some of them as I said will do very well, I’m sure, in that space, are delivering more offshore, but we shouldn’t think that Australia’s international education industry is directly under threat either. It’s a $19 billion sector; it’s our third biggest exporter …

Peter Beattie: [Talking over] Bigger than tourism.

Simon Birmingham: … very important. Bigger than tourism in that sense, a critical, of course, supporter of the tourism industry in many ways. But the attributes Australia has alongside our world-class universities, as an English-speaking country, a country with great lifestyle opportunities, the reforms we’ve been putting in place to visa arrangements to make it as easy as possible for students to come, work arrangements that they can access while they’re here in targeted ways – all of those sorts of things help to support us. And in the cultural sense, the country we are will sustain plenty of desire and interest to study in Australia, but it will be in different ways in the future. It may not be for a fixed two or three year post graduate or graduate degree, it might be for more fixed periods of time in mixed delivery models that occur in different countries around the world.

Peter Beattie: Simon, thank you for your time and good luck in your portfolio. Thank you very much.

Simon Birmingham: Thanks so much guys, a pleasure.