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Higher Education Legislation Amendment
Bill (No.1) 1998
Date Introduced: 1 July 1998
House: House of Representatives
Portfolio: Employment, Education, Training and Youth
Commencement: Royal Assent
amendments to the Higher Education Funding Act 1988
- to vary the maximum amounts of grant that can be made to higher
education institutions under a range of grant categories: and
- to enable the Minister to determine the maximum amounts payable
by the Commonwealth to promote Australian education and training
The higher education system is funded on a
calendar year basis under the provisions of the Higher
Education Funding Act 1988. Funding is provided on a rolling
triennium basis, which means that the level of funding is known for
the next three years. This provides greater certainty to
institutions and enables better forward planning. Although some see
triennial funding as a strength of the current system, others argue
that in future it is likely to act more to insulate universities
from student demand and the need to be innovative and competitive,
than to protect the quality of higher education.(1)
Cost supplementation is another feature of
current education funding, whereby grants are adjusted to cover
increased costs. This Bill appropriates funds for 1999 and 2000,
and provides supplementation for price movements and additional
superannuation expenses incurred by institutions in 1998.
The Commonwealth funds institutions for a
maximum number of student places. The level of Commonwealth funding
is negotiated between the universities and the Department of
Employment, Education, Training and Youth Affairs (DEETYA). This
framework for financing higher education was criticised in the
Final Report of the West Committee's Review of Higher Education
Financing and Policy which was published in April 1998. Under
the heading 'The Way Forward' the Committee stated that:
Instead of the perverse incentive structures,
inflexibility, restrictions on competition and entry into the
market, and the poor access of Australian institutions to finance,
we need a financing and regulatory framework that:
responds to students' preferences about study
options and the location, content and mode of delivery of
education, and provides high quality learning experiences which
meet the particular needs of individual learners;
- protects students and taxpayers and is accountable to students
and taxpayers for the investment that they make in higher
- facilitates effective investment by the Government in research
and research training; and
- enables Australian universities to become major players in a
world-class education industry that can play a direct role in
driving the growth of our economy.
Our conclusion is that fundamental reform is needed in the
funding of teaching and research and in the way that government
supports higher education as an industry.(2)
The Committee recommended a funding model where
the number of students for which a university receives funding
would be determined directly by student choice, rather than by
negotiations between universities and DEETYA. In public comment
which followed the release of the Committee's Discussion Paper the
model of student centred funding was referred to as 'vouchers'.
Although the Government has yet to make its
formal response to the West Committee's report, the Minister for
Employment, Education, Training and Youth Affairs, Hon Dr David
Kemp MP, said in a Press release dated 12 November 1997 that 'the
Federal Government had no intention of introducing a voucher system
Current Levels of Funding
The major decisions for funding higher education
for the current three year period were announced in the 1996-97
Budget. This reduced the forward estimates for higher education
operating grants by 1 per cent in 1997, by a further 3 per cent in
1998 and a further 1 per cent in each of 1999 and 2000. The maximum
grants for general teaching and research purposes will decline in
1999 and 2000 as follows:
Sources: Higher Education Funding Act
1988, section 17 Maximum Grants; Higher Education Legislation
Amendment Bill (No.1) 1988, Item 2 of Schedule 1.
In addition to operating grants, the total
revenue available to higher education institutions includes
students' contributions through the Higher Education Contribution
Scheme (HECS), revenue from fee-paying students, capital grants,
and funds from research and development, investment earnings,
donations and bequests. In 1997, the total revenue available to
higher education institutions from all sources was estimated to be
$8.4 billion. This is forecast to increase to $8.6 billion in
2000.(4) Higher education programs are described in detail in the
Department of Employment, Education, Training and Youth Affairs
publication, Higher Education Funding Report for the 1998-2000
Triennium, published in December 1997.
The Commonwealth has been encouraging
universities to develop full fee services for overseas students
since 1985, when a full fee program was introduced alongside a
limited program for part-subsidised overseas students. The former
Government's view was that overseas student services should be
treated as an education export, except where scholarships would
advance government aid or international objectives.(5)
The total number of overseas students in
Australia has grown from around 21,000 in 1988 to 140,000 in 1996.
In 1996 it was estimated that international students contributed
over $3 billion to the Australian economy, an increase of nearly 50
per cent in just two years.(6) The Government estimates that the
total number of overseas students studying in Australia is expected
to rise from 151,464 in 1997 to 181,000 in 2001 - a 19.5% increase.
This is expected to increase total revenue from overseas students
by 39%, from $3.22 billion in 1997 to $4.49 billion in 2001.
The Australian International Education
Foundation (AIEF) was established in 1994 as a government-industry
partnership. Its role was, in part:
- to establish a broad range of Australian international
education, training and research activities and
- to develop a marketing strategy to enhance the perception of
Australia as a major contributor to and provider of high quality
education, training and research internationally.
The AIEF was financed through a Trust Fund.
Contributions to the Trust Fund were initially on a 2:1 government
to industry basis. This was reduced in the 1996-97 Budget to 1:1
for the two years 1996-7 and 1997-8, and the Government allocated
$3 million for each of the two years. The Government also
foreshadowed withdrawing all funding from the program by
2000-01.(8) The universities were dissatisfied with the AIEF and in
1997 most did not pay their full subscriptions to the Trust
In 1996 the Allen Consulting Group was
commissioned by DEETYA to review the role of the AIEF and to
provide an assessment of the appropriate roles for government and
the education and training industry in facilitating further growth
in education and training exports. The review was completed in
On 11 May 1998, the Minister for Employment,
Education, Training and Youth Affairs, Hon Dr David Kemp MP,
announced that the Government would provide $21 million over the
next four years for an international marketing campaign to promote
Australia's education and training services overseas.(11) The
amounts in this Bill total $7.367 million for three years
1998-2000. According to press reports the $21 million does not
represent net extra spending - it has been taken from other higher
education areas, including the Australian National Training
Authority national project funds.(12)
Dr Kemp also announced that the marketing
campaign would focus on traditional Asian markets as well as
relatively untapped student markets such as India, China, Europe
and North and South America. It would help to minimise the impact
of the Asian economic crisis on the number of overseas students
studying in Australia.(13)
At the same time Dr Kemp said that the AEIF
would be renamed Australian Education International (AEI). It would
be more fully integrated with the operations of DEETYA and wholly
funded by government. Its role would be to act as a link between
the overseas promotion of Australian education and training and the
broader Government objectives for foreign affairs and
Amendments to the Higher Education
Funding Act 1988
Item 1 of Schedule 1 changes
the heading of Chapter 2 of the Act from 'States Grants for Higher
Education Assistance' to 'Grants for Higher Education
Item 2 amends Section 17 of the
Act which sets the maximum level of funding grants payable to
higher education institutions for operating purposes in a given
year. Operating purposes is defined in section 3 and includes the
general teaching purposes and general research purposes of the
institution, the provision of courses of continuing education, and
the purchase of equipment and minor building projects associated
with general teaching and research purposes. The proposed amendment
reduces the maximum level of grants payable in 1998 by $1 million
from $3,860 million to $3,859 million, and legislates amounts of
$3,260 million for 1999 and $3,120.5 million in 2000.
Item 3 amends Section 20 of the
Act which provides for grants to institutions for superannuation
expenses. The amendment increases the maximum amount payable for
1998 by over $5 million from $103.6 million to $108.7 million, and
inserts amounts of $112.7 million in 1999 and $116.3 million in
Item 4 deals with grants to
open learning institutions and ceilings on those grants. A maximum
amount of $221,000 is proposed for each of 1999 and 2000, compared
with $218,000 in 1998.
Item 5 amends Section 23C of
the Act which operates to limit the amount payable for an
aggregated group of grants. The section caps the total cost of
grants made under the following categories: national priority,
innovation, promotion of equality of opportunity, special research
assistance, advanced engineering centres, and co-operative
multimedia centres. An additional $6 million is available in 1998,
up from $475 million. A consolidated amount of $466.5 million is
prescribed in 1999 and $395 million in 2000.
Item 6 amends Section 24 of the
Act which provides for grants payable to teaching hospitals
attached to higher education institutions. The proposed amendment
increases by $1,000 the maximum amount payable for the year 1998,
and prescribes an amount of almost $5 million for each of the years
1999 and 2000.
Item 7 amends Section 27A of
the Act which provides for grants for special capital projects. The
amendment increases the maximum amount available in 1998 by $9,000
and prescribes an amount approaching $39 million for each of 1999
Item 8 deals with expenditure
on the international marketing and promotion of education and
training services provided by Australian institutions. The proposed
amendment is inserted in Section 27 which enables the Minister to
issue guidelines relating to expenditure on special purpose
projects. The proposed new section 27D allows the
Minister to determine the maximum amount payable by the
Commonwealth for the international promotion of Australian
education and training services. In 1998 this amount is to be
$1.016 million, increasing to $2.468 million in 1999 and to $3.883
million in 2000.
The amendment proposed by Item
9 has the effect of providing for the Minister to table in
each House of Parliament, determinations of the maximum amounts
payable by the Commonwealth for international promotion of
Australian education and training services.
Amendments relating to James Cook
On 1 January 1998 the name of the University
changed from 'James Cook University of North Queensland' to the
'James Cook University'. The University is established by an Act of
the Queensland Parliament and the name change was part of the
James Cook University Act 1997 (Qld) which commenced on 1
January 1998.(15) This Bill amends the Employment, Education
and Training Act 1988 (Item 1) and the
Higher Education Funding Act 1988 (Item
2) to reflect the change in the University's name.
- Learning for life: final report, Review of Higher
Education Financing and Policy, April 1998, Dept of Employment,
Education, Training and Youth Affairs, Canberra, 1998, 114.
- Ibid, 21-22.
- 'Education and training vital for our future', Dr David Kemp
MP, Press release K76/97, 12 November 1997.
- Higher Education Funding Report for the 1998-2000
Triennium, Department of Employment, Education, Training and
Youth Affairs, 1997, 1.
- The Australian International Education Foundation: Review
of the government-industry partnership, consultancy report to
the Department of Employment, Education, Training and Youth Affairs
by the Allen Consulting Group Pty Ltd, March 1997, 12.
- Ibid, i.
- '$1.2 billion growth in education export industry', Dr David
Kemp MP, Press release K33/98, 11 May 1998.
- Portfolio Budget Statements 1996-97, Department of
Employment, Education, Training and Youth Affairs, Program BM75,
(Budget Related Paper no. 1.4), 157.
- 'Reduced AIEF gets green light', Australian, 21
January 1998, 37.
- The Australian International Education Foundation: Review
of the government-industry partnership, op cit.
- '$1.2 billion growth in education export industry', op cit.
- 'Govt backs foreign student boom', Michelle Grattan,
Australian Financial Review, 12 May 1998, 8. and 'Reduced
AIEF gets green light', Dorothy Illing, Australian, 21
January 1998, 37.
- '$1.2 billion growth in education export industry', op cit, 1.
- Ibid, 2-5.
- James Cook University of North Queensland, Annual report
1997: the year in review, Townsville, 1998, 60.
20 August 1998
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