The Turnbull Government will ensure the costs of Australia’s higher education system are sustainable and keep a strong focus on students’ needs as part of changes announced today.

Minister for Education and Training Simon Birmingham said Australia has some of the world’s leading higher education institutions, but the cost and quality of the system must be sustainable for future generations.

Minister Birmingham said higher education funding will remain at a record high, of at least $17 billion annually.

“Since 2009, taxpayer funding for teaching and learning has increased by 71 per cent, twice the rate of growth in the economy,” Minister Birmingham said.

“This has been coupled by strong growth in student enrolments since the introduction of the demand driven funding system, with domestic undergraduate enrolments growing by 33 per cent between 2009 and 2016.

“At the same time, attrition has increased, six-year university completion rates have fallen from 67.2 per cent to 66 per cent and short-term employment outcomes dropped from 83.6 per cent to 70.9 per cent. Student debts continue to grow and up to one quarter of new student loans are not expected to be repaid.”

Minister Birmingham said that the rapid growth in costs had contributed to the budget deficit created under Labor, which was why a slowing of further spending growth had been factored into every budget projection since 2014.

“Despite years of consultation and our willingness to work with Labor, the Greens and Xenophon parties, Australia’s universities and Parliamentarians have preferred to turn a blind eye to the challenges confronting both the federal budget and higher education,” Minister Birmingham said.

“The policy measures announced in MYEFO will partially deliver on previous budget decisions that moderate the rate of funding growth, which had contributed to the budget deficit, while still driving universities to focus on the needs of students and ensure Australia’s income-contingent loan system can still be accessed by future generations of students without upfront fees.

“Australia must face up to the task of putting our higher education costs on a more sustainable, responsible path for the future while also having a stronger focus on supporting students.”

MYEFO reduces the expected savings by almost $600 million relative to Budget, following a reduction in expected savings of almost $700 million in the 2017-18 Budget.  Overall, the changes are expected to save $2.2 billion in underlying cash terms over the forward estimates, compared to previous projections of $3.5 billion.

The effect of the planned changes will grow direct funding to universities for teaching, learning and research from $10.7 billion in 2017 by eight per cent to $11.5 billion in 2021 and taxpayer-backed student loans paid to universities will grow from $6.4 billion to $7.4 billion, meaning a total funding increase of 11 per cent, if universities maintain their current enrolment patterns. 

The government will not proceed with the previous legislative proposals but will instead, within existing legislation, freeze the maximum amount of funding provided through the Commonwealth Grant Scheme (CGS) for bachelor degree courses at 2017 funding levels for 2018 and 2019, with CGS funding increases from 2020 onwards to be linked to performance and national growth in the 18-64 year old population.

Universities will continue to receive the indexed student loan component for every student they enrol.  The Government is not capping student places and will continue to fund all student contributions via the Higher Education Loan Program (HELP) according to university enrolment decisions, in addition to the maximum CGS payment.

Minister Birmingham said that dealing with the growth in outstanding student debts remains crucial to ensure the long term viability of Australia’s globally generous student loans scheme, which is why the government will also pursue measures to:

  • set new repayment thresholds for HELP starting at $45,000 with a one per cent repayment rate, and aligning the indexation of the repayment thresholds to the Consumer Price Index (CPI); and
  • introduce a new lifetime limit on how much students can borrow under HELP to cover their tuition fees ($150,000 for students studying medicine, dentistry and veterinary science courses, and $104,440 for other students).

There will be no changes or increases to the current student co-payment arrangements.

The Turnbull Government will maintain its commitment to establishing and maintaining up to eight regional study hubs as well as the removal of unused postgraduate CGS places.

“Collectively, these measures maintain widespread access to higher education and generous funding for universities while being more affordable for taxpayers by stopping universities from effectively writing their own cheque.

“It is clear universities have benefitted from a very rapid period of growth and that economies of scale have been realised under the demand driven system, with teaching costs having grown more slowly than revenue. The cost for universities to deliver courses grew by 9.5 per cent between 2010 and 2015 however per student funding grew on average by 15 per cent. Universities are teaching more students at a reduced cost per student. 

“Under the CGS funding freeze in 2018 and 2019, universities will receive the same amount of funding for bachelor courses as they did in 2017. Independent analysis by Deloitte identified 15 per cent funding headroom in the cost of course delivery which means, should universities wish, they can use these efficiencies to continue to grow their enrolments, consistent with the previously proposed efficiency dividend.

“From 2020, additional funding for bachelor courses will be contingent on meeting performance requirements, consistent with the previously proposed performance payments. Linking funding growth to performance outcomes will encourage universities to further improve their performance, support student retention, and boost graduate employment outcomes.”

Minister Birmingham said the Turnbull Government recognised that universities, including in regional Australia, have used the Higher Education Participation and Partnerships Program (HEPPP) to build aspiration and support students.

“Contrary to speculation, we are maintaining the HEPPP with its existing budget profile but will not proceed with previously proposed changes to its structure,” Minister Birmingham said.

“The Turnbull Government’s record investment in research will also continue.  In the higher education sector, research funding is projected to grow from $2.8 billion to $3.1 billion.

“Today we’re also announcing $70 million for the National Computational Infrastructure (NCI), High Performance Computing facility headquartered at the Australian National University that provides critical support to Australian researchers. This is a vital piece of research infrastructure and our support will help replace the facility’s supercomputer to provide critical support to Australian researchers across many research disciplines.

“Additionally, through our National Innovation and Science Agenda, the Government is providing $2.3 billion over 10 years to support national scale research infrastructure.

“The Turnbull Government will also contribute $7 million for facilities as part of a project to establish the Menzies Institute and Library at the University of Melbourne. The facility will bring together scholars to produce high quality analysis of policy issues, deliver education programs, and undertake comprehensive research.

“It is important to acknowledge the legacy of Sir Robert Menzies, Australia’s longest serving Prime Minister, and this facility will do so by enhancing the study of liberal democracy and effective public policy.”

Minister Birmingham said the Turnbull Government was committed to quality and long-term sustainability across all elements of post-school education.

“Our overhaul of vocational student loans as well as our $1.5 billion Skilling Australians Fund will ensure school leavers have study options to suit their ambitions,” Minister Birmingham said.

“Combined, the Turnbull Government’s support and policies for students to access TAFEs, training providers, universities and other higher education institutions will safeguard the system for this and future generations of students and researchers.”