Opinion Editorial: Australia's higher education sector is one of the best in the world. Fact.

15 Mar 2016
The Australian

By Michael Spence and Vicki Thomson


Plus, Australia relies on its universities to deliver far more of its research than any other first world nation. Fact. Australia’s research is rated as world class. Fact. Australia’s innovation agenda will rely heavily on universities to drive it. Fact.

The evidence of innovation success in the very countries Australia wants to emulate – Israel, the UK, the US and Germany – has required significant public investment to build a dynamic university-industry ecosystem. Fact.

Australian universities are currently significantly underfunded for the research work they do in comparison. Fact. Australia’s universities teach students funded jointly by the taxpayer and the students, both of whom benefit. Fact. University teaching should truly reflect the costs of individual course offerings but currently doesn’t. Fact. In many cases students are heavily cross-subsidising Australia’s underfunded essential research – literally keeping the lights on in the labs and research hubs of Australia’s universities. Fact.

The above is a mix of excellent facts and concerning facts, but they are facts nevertheless, and they require addressing, as does the myth that when Universities open up a public discussion on the need for long-term sustainable funding that addresses those facts, they are attached to Government apron strings and should be removed.

In fact, the research impact of Australian universities – which importantly are public institutions – contributes to the $25 billion the university sector returned to the nation in 2013. As part of this, our universities also drive Australia’s third largest export earner, the $19 Billion of education services to international students.

These international student markets were not developed at any Government’s behest but by universities through the sector’s own creativity as an invaluable revenue stream to assist sustain their funding of research on behalf of the nation.

It is worth noting that of the 69 percent of Australia’s economic activity derived from services, only the education sector has managed to grow its export earnings faster than the total Australian economy over the past decade.

Education is the economic success story of the last decade.  It has been achieved by consistent innovation in an increasingly competitive marketplace, further improvement in the international research performance of universities, and significant widening of access and opportunity for domestic students.

Every one of the above facts is interlinked, or, to be blunt, represents a virtuous circle for Australia in light of the current research funding distortions set out above. We are dealing with an increasingly competitive International student market; the rapid rise of China’s universities and with the UK and the US determined to increase their proportion of students from the Asia-Pacific region.

Critically linked to this is the fact that parents overseas use university world rankings to choose a student destination. Our world rankings are judged predominantly on our research performance (and the Go8 has seven of its members in the world’s top 100). Lower rankings equals fewer high quality International students for Australia. Less or lesser quality research equals lower rankings.

Therefore, as universities we are caught up in the perfect storm. As stated, our research on-costs are significantly underfunded. At the overhead rate for university research of around 25 cents in the dollar most businesses would struggle, let alone those delivering cutting edge research. This leaves our universities significantly lagging behind those in the UK, US, New Zealand and even behind (non-university) Medical Research Institutes in NSW who receive around 40 cents in the dollar.

Yet, the current rigid funding model allows us no way to address the problem, or to remove the distortions that see students in some courses subsiding research because that is simply the only way we have to fund it. This is deleterious to both teaching and research.

There is an urgency to dealing with this and we are in consultation with Government re possible options. The urgency comes because every single day research is an investment being made to ensure our nation’s future. The Prime Minister is saying that every time he promotes innovation as an economic pillar. The fact is the university sector contributes some $160 billion in knowledge and technology, or about 10% of GDP. This is more than Australia’s entire mining sector.

Quality teaching is an investment in our future. That is at the forefront of Education Minister Simon Birmingham’s agenda; something most of his speeches stress. So the responsibility for both Universities and Government is to find a way through the current funding policy conundrum in an era of fiscal constraint.

If the very clear message from Government is that we “can’t grow the funding pie” and we clearly are not going to find that loaves and fishes work, then we need to use policy levers to massage how the funding pie is divided.

Basically something has to give if Australia’s reputation for quality university teaching and research is not to be damaged.  Resolving how to better fund research is the key to alleviating the issues with each of the other interlinked components of the current situation.

The Government has made no secret of the fact that under active consideration is possibly altering the percentage a student is loaned interest free by Government to fund their university education. Currently a student pays 40%, the taxpayer 60%.

Also in the mix are options to recover outstanding student debt.  Neither of those options sound outrageous or unfair to the Go8 given the value to a graduate’s earning power from a quality education.

Graduates do especially benefit from an education in a research intensive university – which Go8 universities are. They do this through exposure to researchers and state-of-the art research kit during their studies. However, students should not be expected to pay two to three times the amount the government does to support the overheads of research.

So the question remains. How do we fund the current research distortion?  Some level of fee flexibility within the policy mix is one option.  However, ultimately Government will have to address the issue of research funding in Australia.  If this Government wants to back proven winners - and the university sector has the runs on the board - and to promote innovation – then somehow within its funding pie it must find ways to invest. It is a false economy to think we should not address this issue. If we do not, it is the Australian economy which will be the loser.

Contact: Vicki Thomson, Group of Eight Chief Executive on +61 417 808 472