162, 2009 10, ISSN
Education Support Amendment (Indexation) Bill
Social Policy Section
Education Support Amendment (Indexation) Bill
introduced: 12 May 2010
House of Representatives
1 January 2011
to the Bill, its
Explanatory Memorandum and second reading speech can be found on
the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
the Higher Education Support Amendment (Indexation) Bill 2010 (the
Bill) amend the Higher Education Support Act 2003 (the
Act) to specify a revised indexation formula for programs funded
under Part 5-6 of the Act.
This gives effect to a recommendation made by the Bradley Review to
A major concern of the higher education sector
has been the indexation formula used for teaching and research
grants and student payments.
While the Act currently provides for
indexation of amounts under it, it does not specify the formula for
calculating indexation adjustments.
The present formula was introduced in 1997
and, despite a review in 2005, has remained unchanged. Universities
have lobbied for a new index in which the salary component of the
index is changed from the present Safety Net Adjustment (SNA) which
makes up 75 per cent of the current index to one that better
reflects salary movements in the sector.
A comprehensive review of Australian Higher
Education was undertaken in 2008 with Professor Denise Bradley as
chair of the panel. The review commonly referred to as the Bradley
review reported in December 2008.
Among the review s 46 recommendations was a recommendation to
maintain the future value of increased base funding for higher
education by an indexation formula that is based on 90 per cent of
the Labour Price Index (Professional) plus the Consumer Price Index
with weightings of 75 per cent and 25 per cent respectively
Although the Government rejected an increase
to base funding it did accept the recommendation for a revised
indexation formula and proposes indexing base funding under the new
formula from 2012.
As the Labour Price Index (Professional)
recommended in the Bradley review has been discontinued, the
Government proposes using the Professional, Scientific and
Technical Services (PSTS) labour price index (discounted by 10 per
The PSTS will replace the Safety Net Adjustment which makes up 75
per cent of the index. The remaining 25 per cent of the index will
continue to be the Consumer Price Index.
The Government estimates that the new index will be around 1.8
percentage points higher than the existing index ; will better
reflect professional salary movements and maintain the real value
of the Commonwealth s funding and student contributions .
The Government s 2009 response to support a
majority of the Bradley review s recommendations was widely
welcomed by universities.
Universities were disappointed the Government rejected a 10 per
cent increase in the base funding rate of student places
recommended by the Bradley review and the delayed start of the full
increases to funding until 2012.
However, the sector was particularly pleased to see a commitment to
an improved indexation rate even with the 10 per cent productivity
Although the Government did not increase the
base funding rate of student places, universities will benefit from
the proposed new indexation rate which will apply to both the
Government s and the student s contribution to the funding of
student places through the Higher Education Loan Program
The Explanatory Memorandum states there is no
financial impact from this amendment .
However, as a result of the new indexation formula, the Government
estimates an additional $2.6 billion over the five years (2011 to
2015) will be provided to the higher education system.
Although the new indexation formula will not
apply until 2012, the Government provided increased transitional
funding of $577.6 million over three years until 2012 13 as a
budget measure in the 2009 10 budget.
In 2011, the increase in indexation will be provided as conditional
funding tied to agreements covering the achievement of
institutional performance targets.
From 2012, the new indexation rate will be
applied to all funding components without condition. The estimated
increased expenditure of $2.6 billion is not itemised in the 2010
11 budget papers but has been added to estimated expenditure of the
15 programs subject to indexation.
Amendments in Schedule 1 of
the Bill are largely technical. They generally amend
section 198 of the Act to define the new index
number; how the index number will be applied; the gazettal of the
index number by the Minister; and the re-setting of the indexation
clock to the 2012 year.
Proposed subsection 198-20(2) provides for the
indexation formula to be specified in the Act ensuring
Parliamentary approval would be required for any change in how the
formula is calculated.
Proposed subsection 198-20(6) provides that a
notice in the Gazette specifying an index number is not a
Item 4 repeals section 198
25, which currently provides for a review of the indexation
mechanism from 2007-08. While the Bradley Review has rendered this
provision redundant, it is noted that the proposed amendments in
the Bill make no provision for any future review of indexation
under the Act.
Senators and Parliamentary staff can obtain further information
from the Parliamentary Library on (02) 6277 2709.