Speech to university, business and student leaders, Canberra

Simon Birmingham: Thank you, thank you very, very much Belinda. Thank you to the  team at Universities Australia, to Barney, to Innes, and your team at AiG for pulling together tonight and thank you to all of you for coming at relatively short notice to be able to join with us tonight because I felt that it was critically important after 12 months of consultation and engagement that when it came to revealing the policy proposals the Turnbull Government is taking forward that we started here with you, the people with whom we’ve been having this conversation.

I want to acknowledge many people in the room tonight, to the various vice chancellors and leaders of Australia’s universities, to the leaders of the different representative bodies of the different universities who are here, obviously UA but of course the other different leaders who are in the room tonight, or absent and no doubt watching via the streaming, in terms of Vicky and Connor, Renee and Caroline. Thank you all for your engagement, which along with that of Belinda’s has been powerful, forceful, strong at times as you would expect from your different representatives and the roles that they play. I also acknowledge that we have representatives from the NUS and NTEU here tonight, as well as the different industry players that Innes acknowledged as well.

Belinda and Innes are both right – universities are absolutely critical and central to Australia, to our success and to our ongoing success. They are critical to the lives of students and their careers. They develop some of the world’s leading research. Research that helps to save lives, research that protects our environment, research that helps to feed us and millions – billions in fact – around the world. They make a huge contribution to the Australian economy, as acknowledged already, not just in the domestic contribution of skilling a future workforce but equally, equally, in the contribution of our international education sector and the $22 billion worth of activity that that stimulates.

Our education sector, of course, also plays a key role in placing Australia in the world. In building connections and relationships and developing and boosting Australia’s place in the world. There is much that we should be proud of of our world-class higher education system and our well regarded universities. And much of the credit for that success lies with many of the individuals in this room tonight. But we must work and work hard to make sure that is maintained and also on behalf of the Government and on behalf of the taxpayers who elect us, we must also work hard to make sure that it is affordable and sustainable into the future.

One year ago, last year’s budget, the Turnbull Government committed to consult on a package of higher education reforms. The ambitions we set were that those reforms be fair, that they drive quality and excellence, that they ensure students have choice and opportunities to succeed. This time last year, we released a policy options paper: Driving Innovation, Fairness and Excellence in Australian Higher Education, which openly, prior to the last federal election, outlined a range of possible areas for reform and action. 

It provided an opportunity to confront the challenges that face the Australian higher education system and it invited a robust exploration of potential solutions. There were over 1200 submissions which informed some very robust exchanges with people like Belinda, with the expert panel that I appointed last October. Working hand in glove, we had some very good discussions through that panel, where, on occasion, we all took turns at playing devil’s advocate in testing different ideas put forward by different universities, different sectoral representatives and organisations, those who made submissions in the process. After all, policy should be built around a contest of ideas, based on evidence and understanding its impacts on all parts of the community.

After three years of debate and of unlegislated reforms we need to chart a path to funding certainty, to system sustainability and greater transparency and accountability to both students and taxpayers. At last year’s budget we said we wouldn’t proceed with full fee-deregulation. We haven’t and we will not. We canvassed some alternatives, in our policy options paper, even in the face of some unhelpful sloganeering from the sidelines during the election. However, support for those alternatives was cool, at best. I said I would consult and listen in relation to all aspects of reform. I said there would be no great surprises. Barney, you said a year ago, you couldn’t fault me on the former in terms of consulting and listening. I trust that tonight, hopefully, we can deliver on the latter in terms of there not being too many surprises.

Tonight I announce that we will not proceed with the unlegislated higher education measures that remained in last year’s Budget, but in their place we will propose to the Parliament a package of reforms that we believe are fundamentally fair, reasonable and necessary. We start from a clean slate with a guarantee that no student will pay 1 cent upfront for their higher education. Students will no longer face the prospect of fee deregulation and universities will not face a 20 per cent cut to their funding.

As you all know, domestic undergraduate enrolments have grown strongly in the last 25 years. In fact, we’ve seen some 31 per cent growth in enrolments. Thirty one per cent, just since the demand driven system was introduced, with growth accelerating over that time. This growth supports, as we’ve discussed, a strong labour market and dynamic economy, but it has imposed significant costs on the Government budget and taxpayers. Since 2009 student funding by the taxpayer has increased by 71 per cent, twice the rate of growth we’ve had across the Australian economy.

Outstanding taxpayer-funded student loans have tripled since 2009, now standing at more than $52 billion. And without changes to this situation, the Government actuary estimates that around a quarter of that is expected to go unpaid. As we made clear in last year’s policy options paper, a top priority has to be to make the higher education funding system sustainable for this and future generations. 

At the same time, we need to ensure the system meets the needs of students and promotes excellence. The current bias towards enrolments in bachelor degrees does distort student choices. Universities ought to be appropriately accountable for their enrolment decisions, the use of the funds contributed by taxpayers and students and the ultimate success of graduates.

The Cost of Delivery of Higher Education study undertaken by Deloitte Access Economics in 2016 showed that between 2010 and 2015 average costs per Equivalent Full-Time Student Load or EFTSL, to use the sector jargon, have increased by 9.5 per cent. At the same period of time, funding to universities has increased by around 15 per cent.

Unsurprisingly, surging enrolment numbers, that 31 per cent growth I spoke of before, coupled with the use of new technologies and approaches have generated economies of scale and efficiency opportunities for universities. At a time of major budget pressures, which the higher education sector, in terms of the funding growth afforded to it, have contributed to, taxpayers should expect to share in efficiencies that have been realised by largely taxpayer-funded institutions.

We have moved away, as I said before, from the 20 per cent Commonwealth Grant Scheme reduction proposed in earlier reform package. But we do propose now that universities will be subject to a 2.5 per cent efficiency dividend on CGS payments in each of 2018 and 2019.

The overall net effect of this on universities on average equates to a reduction of funding for CGS payments specifically of around 2.9 per cent. Other payments, notably of course – importantly, of course – research payments and other programs remain unaffected by such an efficiency dividend. 

University CGS revenue has grown faster than costs over recent years, and the efficiency dividend applied to this stream of revenue only, and not applicable, as I said, to research or other contributions, will provide a capacity for an element of budget repair out of some of the efficiencies that your hard work has helped to realise.

When considered against total Commonwealth Government payments of $74 billion to universities over the next four years, the total net impact over that four year horizon of this reform proposal will be around $2.8 billion, compared to a $3.5 billion impact of the previous policy proposals. 

We also will require students to share marginally more of the cost of their education than they presently do. As I’ve said – and I’ve emphasised this time and time again – I guarantee that students will not be placed in the position of having to pay a cent upfront, and we guarantee they will no longer face any form of fee-deregulation. Instead, we will seek to better balance the contribution of fees paid by students and taxpayers. The average student share of fees will lift slightly from 42 per cent of their total fees to 46 per cent, while the average share of fees funded by taxpayers will drop slightly from 58 per cent to 54 per cent. Notably though, taxpayers will still on average pay the majority of student fees.

Increases will be phased in, starting with a 1.8 per cent increase in 2018, cumulated to a 7.5 per cent increase by 2021. This means that increases in student fees over a four year course will range from $2000 to, at the absolute maximum, at most $3600 over that four year course. Averaged out over the four years, that means an increase in fees of around $17 per week for a student – fees that are entirely deferrable under the interest-free HELP loan scheme. 

The maximum any student will pay under a four year Commonwealth-supported course is $50,000 – well short of some of the scare campaigns we’ve seen even in recent days. Even the most expensive course – a six year medical degree that brings substantial private benefits – will result in maximum student fees of $75,000, while taxpayers for that medical student will pay $137,300 of those fees.

In reflecting on students facing a marginally higher rate of contributions, it is worth addressing a key myth that is repeated in arguments against such a measure: that it will turn students away from enrolling, especially those from disadvantaged backgrounds. However, the facts show that the greatest success HECS, or HELP as it’s now known – Australia’s world-leading income contingent loan scheme – the greatest success of this scheme has been essentially to completely insulate students from being deterred to enrol.

Since student contributions were introduced, and following subsequent increases to them, participation has only gone in one direction, and that is up. Since 1989 student enrolments have grown by 149 per cent, with enrolments by students from lower socio-economic backgrounds increasing by an even higher 172 per cent. The reality is that students know the employability and likely income enhancement from holding a university qualification are real, and they are worth and outweigh- the benefits far outweigh the costs which continue, as I said, to be entirely deferrable. 

The Deloitte report hasn’t just considered total university costs, but has also looked at costs by discipline. As a result, the Turnbull Government will introduce a clinical loading for veterinary science and dentistry to align with the clinical loading for medicine, in recognition of the additional clinical costs associated with training in those two disciplines. The report otherwise did not support significant changes and broadly confirmed the findings of the Base Funding Review. In light of this, all other cluster funding arrangements will remain unchanged.

To maintain our very generous student loans scheme, about which I’ve spoken, the timing and amount of repayments of HELP debts will change. Currently, we ask students to start paying back their HELP loans when their annual incomes reach around $55,000. The percentage they pay back rises in line with their income levels. Labor supported the Government to slightly reduce this threshold after the last election, and we thank them for that cooperation.

The proposed new minimum repayment threshold will be set at $42,000 from July next year, with a new one per cent repayment rate. There will also be a new maximum threshold of $119,882 with a repayment rate of 10 per cent. From July 2019, the indexation of these thresholds will be linked to the consumer price index. 

The new minimum repayment threshold is 20 per cent above the full-time minimum wage. At a repayment rate of just one per cent an employee, a graduate, will pay back just $8 per week of the student loan that funded their university degree. This proposal is fair, measured and modest, but it does help to address $52 billion of debt we currently have sitting on our books, and the current threat that much of that will be unpaid. 

These reforms are the most major redesign of the loan repayment thresholds in a decade, and are necessary to ensure the income-contingent loan system that Professor Bruce Chapman and others helped to design remains sustainable so future generations of Australians, regardless of their background or their financial means, can continue to access higher education without upfront fees.

For the first time, an element of university funding will become contingent on performance in areas nominated by the Government. From January next year, 7.5 per cent of a university’s funding from the Commonwealth Grant Scheme will be contingent on universities meeting performance requirements for admissions and transparency. 

From 2019, we will introduce performance requirements in relation to student retention and success. These metrics will be determined in close consultation with the sector, and will recognise the unique position of each institution to ensure the system has integrity and commands confidence in driving institutional improvement.

Legislation for this performance measure will guarantee that the entire pool will be invested into higher education. Should funding be withheld from one institution, it will be reinvested into others, better meeting their performance indicators to further support research, equity measures, or overall educational excellence.

In a world where universities rather than Canberra bureaucracies determine the number of students they enrol and the disciplines in which they are enrolled, there must be a mechanism that ensures accountability to public policy priorities, especially to the quality of student outcomes. These new performance measures will put students at the centre of learning because we know that retention, completion, student satisfaction and getting a job are central to the mission of our higher education institutions – a mission that I know you all share.

Consistent with accountability is greater transparency, to ensure that institutions are making the right decisions about who they enrol and what courses they enrol those students in, and the potential students are making informed decisions, empowered with the best possible information. That is why we developed the QILT – which we will rename with its looming reboot – to give students the information to decide for themselves what institution and course best suits them. 

Work is also afoot between my department and the Tax Office to transform this accountability mechanism from one informed largely by survey data to one that publishes real time information on graduate employment and incomes ideally by institution and discipline.

We also accepted as you know, all 14 recommendations of the Higher Education Standards Panel’s report on admissions transparency and this morning Professor Kerri-Lee Krause, the chair of the transparency working group, released a draft consultation paper to the sector. I also commend the further work that Professor Peter Shergold and the HESP panel are doing on attritions and look forward to seeing the outcomes of their deliberations.

Our reforms to admission processes will be supported by additional resourcing to the Tertiary Education Quality and Standards Agency of more than $3 million over four years.

The Government will also work with you to establish a more transparent framework to collect financial data to report annually on the cost of teaching and research, with data similar to that of the Deloitte’s cost of delivery work released today. I also hope that we can convince the states and territories, who also regulate universities despite mostly collecting more in tax from you than they provide to you, I hope we can convince them to work with us all to better align and simplify reporting requirements across different governments and agencies.

Access to higher education by less represented groups in Australia has, as I indicated before, steadily improved as total enrolments have grown. In fact it’s grown faster in total enrolments. But continued improvement in participation remains unfinished business, especially in regional Australia. We will do more for remote students who wish or need to remain in their local area. The Government will invest $15 million over four years to help set up and maintain up to eight community-owned, regional study hubs across mainland Australia. Coupling the best of technology with local student support, these centres will support regional students to study courses in their own towns, by distance from any participating Australian university. Two regional study hubs are already underway in Geraldton and Cooma, and a feasibility study is looking at one in the Pilbara. With the help of state governments, local councils, universities and other key groups, we’ll work to find the best locations and proposals for additional hubs that expand access for regional students.

Reports of the demise of the Higher Education Participation and Partnership Program, like a number of reports recently about these reforms, have been plain wrong. From January next year, the HEPPP will be embedded in the HESA legislation as a per student equity loading to drive engagement, retention and outcomes for students from lower socio-economic and Indigenous backgrounds. Many of these students of course are also from regional Australia.

The Government has committed $59 million in ongoing support to HEPPP and it will now be delivered in three funding streams to better target it to the students who need it most: A $985 – indexed loading for each eligible student. Performance funding based on increased success rates of those students. And a National Priorities Pool with an allocation of $9.5 million to have a greater focus on rigorous evaluative research and to encourage collaboration between universities

Complementing our HEPPP improvements, from January 2019, we will overhaul current systems so the fixed numbers of enabling places, which help under-prepared learners to embark on higher education qualifications, are allocated on a cyclical basis through a competitive tender process. This process is designed to identify those higher education providers that achieve high standards of academic preparation and deliver high quality student outcomes. 

While the demand-driven system for undergraduates has empowered students to some extent, the continued allocation of Commonwealth Supported Places for sub-bachelor and post-graduate places has acted as something as a handbrake on course innovation and effective student choice. From January next year, public universities will be able to enrol students in a demand-driven, Commonwealth Supported Place in sub-bachelor level diplomas, advanced diplomas and associate degree courses.

Some people claim that we have too many students in our universities nowadays. An alternative scenario is that, because of this inconsistency in public policy settings, too many perhaps have been forced into one size fits all three and four year bachelor degrees, when innovative one or two year qualifications, geared to industry needs, may deliver equivalent or improved employment outcomes.

To be eligible for funding under our reforms the student must not have completed another higher education qualification, the course must respond to industry needs and it must fully articulate into bachelor programs. This reform recognises the flexibility that shorter sub-bachelor courses can have in meeting workforce demand. The type of demand that Innes spoke of earlier. It will also allow for more industry input to curriculum and partnership to design and improve the job readiness of graduates. 

Similarly, the piecemeal allocation of Commonwealth Supported Places for postgraduate study, at different times and according to different criteria, has left us with an incoherent distribution of places. A particular course may be a Commonwealth-subsidised one at one university while being fee-paying at another. This is unfair and confusing to students and based largely on historical arrangements. 

From January 2019, we will commit $37 million annually to establish a system of postgraduate scholarships, to the value of a Commonwealth Supported Place, that a student can use at an institution of their choice. Students will be selected on merits and will determine where they want to study and not be driven by arbitrary, historical allocations that have paid no heed to student choice.

As a result of our reforms, students will be empowered to choose the university that best suits them, whether at a sub-bachelor, undergraduate or post-graduate level. 

From January next year, we will also be putting funding towards Work Experience in Industry units that are credited towards a Commonwealth supported qualification. Study which is integrated with industry has significant benefits for the job readiness of graduates. But there is currently little incentive for institutions to offer this. Students, universities, employers, industry and our economy will benefit from closer engagement, helping to guarantee the relevancy of a qualification and the employability of a graduate. Supporting work integrated learning, while expanding the possibility for shorter university qualifications to be developed and ensuring that institutions are held to account for student outcomes should all help to drive innovation across our universities and a strong focus on ensuring that students who are enrolled not only graduate but are ready for work when they do so.

Most permanent residents and New Zealand citizens living in Australia will gain access to HELP loans for study in a university as of January next year, instead of the current arrangements where we provide access to a Commonwealth Supported Place but they face upfront fees and cannot access loans. Special Category Visa New Zealanders who arrived in Australia as a child and have resided in Australia for ten years will continue to receive access to CSPs and loans. Converting these students to fee-paying students but offering them access to HELP loans will remove the impediment of up-front fees currently faced by permanent residents or New Zealanders and this has become possible of course thanks to the new arrangements for the recovery of HELP debts from graduates living overseas that were introduced by the Turnbull Government.

Our priorities for these reforms have been to ensure they lift quality, enhance choice, drive innovation and improve equity of access, all while trying to deliver financial sustainability. Students are the prime reason we have universities. Students are the prime reason we fund universities. They are the future researchers, research being the other prime reason of course that we fund universities. They’re the future researchers, technicians, leaders of industry, employees and employers of other Australians. We need to nurture their progress, expand their horizons, provide them with opportunities and ensure they have the information, resources, support and encouragement they need to succeed.

As Jeffrey Bleich said at the UA conference in March … our best minds and universities can forge a new vision. I want to work together with you – the students, the higher education sector, industry, the community and the federal Parliament, to build consensus around these reforms.

From this reform proposal we can deliver certainty for our outstanding teachers and researchers, as well as the students of today and the students of the future, that we are setting Australia’s world class higher education sector up to successfully confront the challenges and opportunities that lie ahead with financial settings that are sustainable for the long term. 

As I have said before, standing still is not an option. We will all face things we did not predict and will have to respond to things we did not seek. But Australians are resilient and innovative, no more so perhaps than our universities and we can and will rise to these challenges. Working together across political, social, and geographic lines we can secure a vibrant, sustainable, adaptable, internationally renowned higher education sector in which we can all be incredibly proud.

In keeping with my promises of consultation and no surprises that Barney had previously commented on, I trust that tonight I haven’t surprised you too much. I do look forward to your questions and to working with you all in the coming days, weeks and months.

Thank you very much.