Speech to Australian Chamber of Commerce and Industry 
The Skills for the Job: Ensuring vocational education and training delivers for employees and employers
Sydney 5 February 2015

I would like to begin by thanking ACCI for not only hosting me today, but for being a strong advocate for training that focuses on job outcomes, and employer-led training.

98 years ago a 30 year old Australian infantryman by the name of Patrick O’Loghlen lost his right leg as a result of injuries sustained in the Battle of Polygon Wood in Belgium.

Returning home from World War I Paddy, my paternal grandfather, did what any Irish-Australian, former soldier with just one leg – and therefore just one foot – would do … he trained to become a boot maker!

My Stepfather, Jim, started his working life as a cook in the Royal Air Force.  By the time he migrated to Australia he had trained and was working as a butcher, although later work as a bus driver and farrier would ensue.  My aunt started out as a hairdresser, while Mum variously worked in administration, retail and driving.

Vocational education and training has been a large part of my family's life.  As it has been, and continues to be, for most Australian families.

With all of the attention that the university sector receives in schools and in the media it may surprise many to hear me say that VET directly impacts on most Australians. But the statistics verify this claim.

Around 40 per cent of school leavers go straight onto university.  More than half do not, with around 21 per cent proceeding automatically into some form of vocational education.

However, it is in learning throughout life that VET comes to overtake the university sector for community wide participation.  In 2013, 1.31 million studied at university, yet around three million Australians participated in some form of vocational education and training.

Notably, private funding of vocational education is far more established than of university education, with around half of the three million participants undertaking some form of publicly
subsidised training, while the other half engage purely in fee for service training.

But university education and vocational training do not sit as independent silos. 

Many Australians use VET courses as a bridge to obtain the necessary foundation skills or entry requirements to embark on a university education.  Equally, many university graduates require VET qualifications to pursue their chosen career. 

But at its heart, vocational education and training is about providing employees or potential employees with the skills for a job … a pathway into employment or into enhanced employment

Even more than this, vocational education is central to business start-ups.  According to 2011 Census data around 23 per cent of business owners have a bachelor degree or higher, while nearly forty per cent hold a certificate level qualification, diploma or advanced diploma.

Vocational education is central to Australia's economic growth, to our business productivity and to employment outcomes. 

A strong and prosperous economy that delivers the jobs Australian families want requires a well-functioning VET system that delivers the skills we need.  That's why it sits as one of the four pillars of our governments Competitiveness Agenda.

The VET sector has long been populated by a variety of providers such as government owned TAFEs, schools, not for profit Registered Training Organisations, privately owned Registered Training Organisations, Group Training Organisations and some universities.  Each has played an important role in providing quality outcomes and each should continue to do so.

In recent years the states have, to varying degrees, introduced more demand driven approaches to the availability of publicly funded VET qualifications and opened up markets for the supply of VET qualifications.  These reforms have been complemented by the increased availability of income contingent loans at a federal level for VET students via VET FEE – HELP.

These approaches are significant and important – students should have greater choice in what training they want to receive, how they receive it, and who provides it.

In fact, research conducted by National Centre for Vocational Education and Research has shown that increasing the opportunities for students to drive VET choices has resulted in increased enrolments, including by people from disadvantaged backgrounds.

Even more importantly, the study showed that an entitlement to a student subsidy for the course of their choice, and provider of their choice, was associated with an increase in the student’s chances of being employed six months after the study, and an improvement in student satisfaction with their course.

In the discussions surrounding contestability in the VET market we should remember that the focus should be on students, their choices, and the ability of training to improve their chances of getting a job.   

Australians are blessed with a tertiary sector that is internationally well regarded – both our universities and our vocational education.

The reforms to Higher Education being pursued by Christopher Pyne will ensure that our universities continue to be among the best in the world.  They will also make universities more responsive to the demands of our economy for graduates, rather than being unduly influenced by the nature and availability of government subsidies.

Equally, Australia's system of vocational education and training is also highly regarded internationally, with many countries seeking to emulate our system of nationally recognised
qualifications.  But, like the university sector, we must work to retain this high regard.

Although we know that VET is, for the most part, well regarded at home, as evidenced by the millions of participants and tens of thousands of employers accessing vocational education and training, it is not without its problems, both real and perceived.

In the 43 days since being sworn in as the new Commonwealth minister responsible for vocational education and training I have engaged widely.

Through 10 consultation sessions across six cities (and with more to come) I have heard the views of around 1,000 representatives of training organisations, industry bodies and employers.  

I have visited employers, large and small, listening to apprentices, trainees and employees of various skills levels. 

I've seen Registered Training Organisations in action, and met with students for whom VET in Schools has provided an alternative to dropping out of school.

Generally the people I've listened to are positive, but virtually all see scope for improvement and frequently they agree on the areas where improvement is necessary.

Almost universally stakeholders identify quality as the number one concern.  Are a handful
of dodgy providers, inadequately delivered qualifications and poorly developed training packages tarnishing the reputation of vocational education and training?

Relevance is the next most often cited concern.  Are qualifications, training package content and funding incentives geared to the actual needs of employers and our economy?

Red tape triumphs next.  Between regulators and funding entities, the states and the Commonwealth, are we strangling both training providers and employers with a maze of reporting requirements, assessments and audits, without necessarily lifting the quality of our training outcomes?

Finally, the status of vocational education features widely among those with concerns. How do we stop VET pathways from being perceived by too many as second rate and promote the benefits of trades and skills as equally valued alternatives to a university degree?

The frequency and range of concerns expressed by key stakeholders in the VET sector make it clear that the need for reform is real, particularly the concerns raised by employers.

The 2013 National Centre for Vocational Education Research survey of Employer Use of the VET System demonstrated increasing employer concern about its ability to meet their needs.

In fact, employers’ use of the VET system has decreased.  Between 2011 and 2013 the
proportion of employers:

  • using the VET system decreased 4.2 percentage points to 51.9%;
  • with jobs requiring vocational qualifications decreased 3.1 percentage points to 33.3%;
  • with apprentices and trainees decreased 3.5 percentage points to 26.9%; and
  • using nationally recognised training (which was not part of an apprenticeship or traineeship) decreased 3.7 percentage points to 20.0%.

The proportion of employers satisfied with training as a way of meeting their skill needs has also decreased.  Between 2011 and 2013 the proportion of employers satisfied that:

  • vocational qualifications provide employees with the skills they require for the job decreased 6.3 percentage points to 78.3%;
  • apprentices and trainees are receiving the skills they require from training decreased 4.1 percentage points to 78.8%;
  • nationally recognised training (which was not part of an apprenticeship or traineeship) provides employees with skills required for the job decreased 6.1 percentage points to 83.1%; and
  • unaccredited training provides employees with skills required for the job decreased 5.9 percentage points to 90.3%.

The concerns identified from my consultations and the trends identified by the NCVER cannot be ignored.

The Prime Minister made clear the importance that he places on vocational education as part of our government’s focus on jobs and families by creating a ministry dedicated to its effectiveness.

As that new and dedicated minister I am determined to ensure that VET providers and qualifications are of the highest quality; have the greatest relevance to employment outcomes; can operate as efficiently as possible; and are well regarded by students, parents, employers
and the wider community.

Fortunately, my predecessors started this reform journey.  As ministers with shared responsibility for different aspects of vocational education and training Ian Macfarlane and Sussan Ley initiated numerous valuable reforms.  Their work needs to be completed, but there
is more to be done.

Improving the relevance of publicly subsidised training to employers is central to our ambition to boost productivity and competitiveness, which in turn creates more jobs.

Our wholesale reappraisal of the way training packages are developed, by whom and what they contain is all about responding to the needs of employers.  Industry will be at the heart of this process because it is employers who know what skills and competencies they need in their future employees.

We are also encouraging greater utilisation of raining opportunities by employers in growth sector industries through our $476 million Industry Skills Fund.  Later this year we will commence a $38 million pilot of training vouchers directly to micro, small and medium sized businesses who employ an unemployed young Australian.

Effective support for apprentices and their employers at all stages of an apprenticeship will be increased and red tape decreased through the establishment of the new $600 million Apprenticeships Support Network and complementary management system that will ease paper based records and enhance e-business capabilities.

The new framework for VET in Schools, adopted nationally last year, provides a platform from which to improve the vocational education many commence in school – and this work will continue throughout 2015, particularly with regard to career advice.

Offering students solid vocational training in their secondary schooling is one of the best ways that governments can help young people navigate the sometimes confusing pathway from school to a rewarding career, provided it is beginning the development of skills and competencies that are valued by employers.  

We are also aware of significant data gaps in the measurement of VET activity and outcomes. 
The new Unique Student Identifier and Total VET Activity research seek to fill this void so that all future policy decisions are based on the best possible knowledge.

Higher quality training and stronger linkages to employment outcomes will all help to boost the status of VET.   Better data collection will enable more informed markets, where students are better able to assess the relative outcomes of different training providers before deciding where and what to study.

We also know that the status of apprenticeships is, in part, linked to financial challenges some first and second year apprentices face.  In recognition of this our government introduced new Trade Support Loans – an optional income contingent loan like HECS or VET FEE-HELP, targeted specifically to apprentices so as to assist them with meeting the cost of living during those early years.  Almost 16,000 Trade Support Loans have been accessed in just 6 months.

And I am determined to address issues of quality.

Already, at the start of this year, new regulations took effect, which seek to enhance the quality of Registered Training Organisations.  

Our Government is providing $68 million over four years to bolster the enforcement capacity of the Australian Skills Quality Authority (ASQA) and enable ASQA to be more efficient and proactive. We have also established a one-stop-shop complaints hotline that will triage complaints to ASQA or any other relevant state or federal agency.

While boosting the role of ASQA in targeting dodgy training providers we are also reducing its burden on those doing the right thing.  Improved compliance reporting requirements and the removal of full cost recovery measures have eased the red tape burden for many RTOs.

Progressively ASQA will seek to introduce a system of earned autonomy, so that RTOs of the highest standards can further reduce their reporting to the regulator, freeing it up to concentrate more closely on necessary audits and areas of concern.

In particular, our new regulations crack down on unscrupulous and misleading behaviour by some training providers and brokers.

Training providers and their brokers must now be upfront with students and provide clear information about any VET FEE-HELP loans, state entitlements and subsidy arrangements that they sign up to.  The standards also stipulate that training providers are ultimately responsible for services delivered by brokers on their behalf, ensuring that the buck stops with training providers.

However, it is clear that stakeholders believe the crackdown on brokers alone is insufficient to protect the majority of responsible training providers from reputational damage caused by a few rotten apples.  It is evident that more needs to be done to stamp out sharp practice among dodgy training providers.

Prohibition of inducements (such as “free” i-Pads or cash rebates), tightening of marketing practices and enhanced duty of care provisions when signing a student up to a student loan are all ideas that the government will explore further.  It must be clear to all students what they are signing up for every single time their debt level is due to increase.

I have been pleased to see the sector itself is also working to address concerns.

Along with ACCI and its members, the Australian Council for Private Education and Training and TAFE Directors Australia has been strong in their support for improving the quality of VET training, and stamping out unacceptable business practices.

For example, ACPET is reported to have removed around 100 colleges from its membership lists because of quality concerns.

One of the key issues raised with me time and again as I go around the country, is the growth, and misuse, of VET FEE-HELP.

VET FEE-HELP is primarily available to students enrolled in diploma and advanced diploma qualifications at approved providers.  Essentially, it is HECS for high level VET students, providing a government loan that pays the cost of course fees, to be repaid when their income reaches a threshold level.  However, the absence of adequate standards around the recruitment of students, inadequate information surrounding student debts and instances of poor quality training has seen this scheme abused.

Since the previous government relaxed conditions on providers the growth in VET FEE-HELP has escalated dramatically, at a rate twice that predicted in 2012. 

The value of VET FEE-HELP loans issued between 2012 and 2013 grew from $325 million to $699 million, a growth rate of 115 per cent.  In 2014 it grew to around $1.5 billion, also a growth rate of 115 per cent. And growth of this nature is forecast to continue.

As an example, there seems to have been a remarkable proliferation in Diplomas of Management and Business.  The number of VET FEE-HELP enrolments in management and business surged by 170 per cent, from 8,020 in 2012 to 21,635 in 2013 and by a further 195 per cent to 63,776 in 2014.  This equates to more than $162 million in loans in 2013
and more than $606 million in 2014.

Our government supports the principles of VET FEE-HELP.  After all, it was initially introduced by Andrew Robb as John Howard’s Vocational Education Minister in 2007.  We are committed to support continued growth in the programme.  

However, we will not support abuse of this scheme by people out to make a quick buck at the expense of the vulnerable and the taxpayer. 

Employers and the sector have raised concerns with me about students being signed up for “free courses” without knowing there is a loan attached, or the debt they are incurring.

Stakeholders have also raised concerns about students signing up for courses but not being given adequate information about census dates in order for them to make informed decisions about their course and debts.

Training providers, students and parents have identified instances of students signing up for courses of only one unit of study – a miraculously short duration to complete a higher level Diploma or Advanced Diploma course. The notion of the 'weekend diploma' doesn't just bring
into question the adequacy of the training being provided but also means the full debt load for the whole course is levied in one go at the start of the course.  

As well as raising these concerns I have been pleased to see employers and the sector proposing solutions, from establishing minimum capability requirements for enrolling students, to aligning payments to providers with key completion milestones and ensuring diplomas are not completed in an impossibly short timeframe.

The absence of adequate standards around the recruitment of students, information surrounding their debts and the quality of training provided has seen this scheme abused and some vulnerable Australians taken for a ride.

Frankly, some of the behaviour is reminiscent of the fly by night operations established under Labor’s Home Insulation scheme.

Recently the now Labor Opposition have recognised some of the problems being caused by the poor design and inadequate standards associated with VET FEE-HELP. I welcome their acknowledgement of these problems, and the Auditor-General’s planned investigation. 
But I cannot stomach Labor’s hypocrisy in pretending that this is a problem of our Government's making.

Labor is like an arsonist on the issue of VET FEE-HELP.  Having lit the fire they are now crying for the fire brigade to come and put it out, while pretending that they had nothing to do with it.

I won’t stand for their hypocrisy but, having acknowledged the problem, I will now expect their support as the Government moves to fix it.

Measures by the sector to clean up itself, at the same time as the government moves to clean up Labor’s mess, will help improve the confidence of employers, students and their parents, and taxpayers, in our VET system.

Our VET reform agenda is multi-faceted but every aspect of it is about getting better outcomes for students, employers, training providers and taxpayers.

VET reform aims to ensure that vocational education and training is valued by all Australians and delivers the skills our employers and economy need to maintain our world class standard of living.

We all know the anecdotal evidence about the plumber or electrician who earns more than many a university graduate.  There are amazing career prospects for people with VET qualifications in the resources sector, agriculture or hospitality, to name just a few.  Those we rely on to care for our most vulnerable, like childcare and aged care workers, hold VET
qualifications.  And don’t forget the high proportion of business owners with a VET qualification.  We must remind people, especially school students, teachers and parents, of these facts.

My consultations with all stakeholders about the optimal policy setting for vocational education and training will not end following this first burst of activity, but as the dedicated minister in this
space I will continue to speak with all industry participants to deliver the best possible policies.

I started with a reference to my family and I will finish similarly.  My late maternal grandmother was a teacher and primary school principal, or headmistress as they called them in her day.

She was perhaps the greatest influence over my interest in politics, public policy and current affairs.  I know that Nan would be smiling on my recent assignment to the education portfolio and willing me to do everything possible to ensure that all students, whatever their educational pathway, have the skills necessary to succeed in life, to get a job, support their families and
contribute to society.  That is exactly what our government intends to do.