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Higher Education Funding Amendment Bill
Date Introduced: 11 November 1998
House: House of Representatives
Portfolio: Education, Training and Youth Affairs
Commencement: On 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,
- to enable the Minister to determine the maximum amounts payable
by the Commonwealth to promote Australian education and training
services overseas, and
- to provide triennial operating grants to the University of
Notre Dame Australia.
Background to this legislation
This Bill replaces two bills which lapsed when
the election was called on 31 August 1998.
1. The Higher Education Legislation Amendment Bill
1997 was introduced into the House of Representatives on
26 November 1997. It was debated and passed by the House of
Representatives on 9 March 1998. On 12 March 1998 it was introduced
into the Senate but was not further debated. The purpose of the
Bill was to make amendments to the Higher Education Funding Act
- to vary the maximum amounts of grant that can be made to higher
education institutions under a range of grant categories, and
- to alter procedures relating to notification of the Secretary's
decisions about applications for remission of HECS debts in special
The Bill also proposed to make minor amendments to the
Maritime College Act 1978 for the sake of consistency with
the student fee regime prevailing at other higher education
Only the first purpose, that of providing funding to higher
education institutions, is picked up by the current Bill.
2. The Higher Education Legislation Amendment Bill
(No.1) 1998 was introduced into the House of
Representatives on 1 July 1998. It was not debated. Its purpose was
the same as the current Bill.
In addition, it proposed to amend the Employment, Education
and Training Act 1988 and the Higher Education Funding Act
1988 to reflect the name change of the James Cook University.
These proposed amendments are not picked up by the current
Background to higher education
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.(3)
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
Education, Training and Youth Affairs (DETYA). 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.(4)
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 DETYA. 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 then 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 Funding
Amendment Bill 1998, Item 3 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.(6) 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.(7)
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.(8) 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.
At the end of August 1998 there were 85,900
overseas students studying at Australian universities. This was an
increase of 13.7% on the previous year, despite the Asian economic
crisis. Overseas fee-paying students now comprise about 10% of
Australian university enrolments.(10) In an emerging trend, almost
30% of Australia's overseas students are studying by distance
education or at overseas campuses linked to Australian
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.(12) 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 the then Department of Employment, Education,
Training and Youth Affairs 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 then 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.(15)
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.(16)
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.(17)
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 the Department of
Employment, Education, Training and Youth Affairs 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
Funding of the University of Notre Dame
The University of Notre Dame Australia is a
private institution based at Fremantle in Western Australia. In
1997 it had around 1000 students, with a future enrolment target of
2500 students. All students attending the University pay tuition
fees. For Australian students enrolled in undergraduate and
graduate courses in all Colleges except Law, the fee is around
$3,360 per semester, while the average cost of the law course is
approximately $4,900 per semester. Students attending the
institution do not qualify for the Higher Education Contribution
Scheme (HECS) although the institution provides access to a private
loan scheme to assist students financially.
In 1994 the university opened a campus in Broome
which caters for students from the Kimberley Region. The campus is
on five hectares of land provided to Notre Dame by the Bishop of
Broome and offers a selected range of certificate and diploma level
courses as well as degree courses through the College of Arts,
Business, Education and Law. Students are encouraged to transfer
between Broome and the main Fremantle campuses for periods of one
or more semesters. There are around 150 students on the Broome
campus, although only half are doing higher education courses.
The Kimberley Centre at the Broome campus has
received direct financial support from both Commonwealth and State
governments for its aboriginal education programs. In 1997 the
University of Notre Dame Australia received $200 000 under the
national priority projects program provided for by the Higher
Education Funding Act.
As it was originally presented, the Bill would
have included the University of Notre Dame Australia in Table B of
subsection 4(1) of the Act. However, on 11 November 1998 the
Parliamentary Secretary to the Minister for Education, Training and
Youth Affairs, Hon. Trish Worth MP, moved an amendment that would
have the effect of shifting the institution to Table A of
subsection 4(1). The amendment was said to be required because of a
The institutions listed in Table A are able to
receive operating grants under section 15 of the Act. These grants
are provided on a triennial basis and include components for
capital projects and research activity. Institutions in Table B
receive limited operating grants under section 16 of the Act.
Generally, these grants are provided on an annual basis for
teaching activities, although expenditure on equipment and minor
building works is permitted. This distinction had its genesis in
the establishment of the Unified National System (UNS) in 1989:
institutions which met the criteria for membership of the UNS were
listed in Table A, while those which did not meet these criteria
(generally because of their small size or specialised courses) were
included in Table B. These criteria have since been relaxed and a
number of institutions (Batchelor College, the Australian Maritime
College) have been moved from the B to the A list. Only two small
private institutions (Avondale College and Marcus Oldham College)
remain on the B list. All listed institutions are required to
report statistical data to the Department and this is published in
the annual Selected Higher Education Statistics.
The inclusion of Notre Dame in Table A may be
seen as a shift in policy. All other institutions in this category
are public institutions which must provide HECS subsidised places
to Australian students and which can only charge tuition fees in
accordance with sections 13 and 18 of the Act. Other private
institutions are either on the B list (and thus receive limited
operating grants) or are not listed at all (eg. Bond University).
The rationale for maintaining two lists (and two grant categories)
now seems to have diminished. It would appear inconsistent to
provide Notre Dame, but not Avondale College, with access to full
operating grants. Avondale is a private institution operated by the
Seventh Day Adventist Church. Avondale education students qualify
for HECS and it is larger and no more specialised than several
other A listed institutions (Batchelor College and the Australian
Consistency would also seem to demand a
reassessment of the status of the Sunshine Coast University
College, a public institution similar in size to Notre Dame.
Although the College is not regarded as a separate institution by
the Commonwealth, it was established as such under Queensland
legislation. The Sunshine Coast University College Act
1994 establishes the College as a body with its own governing
Council, Chancellor and Vice-Chancellor. The Act also provides for
the College to be affiliated with the Queensland University of
Technology for the purpose of meeting Commonwealth requirements for
access to funds under the Unified National System and to negotiate
with the Commonwealth about the College's educational profile and
funding (Section 37).
In his second reading speech, the Minister for
Education, Training and Youth Affairs stated that this Bill
confirms the overall funding levels detailed in the Higher
Education Funding Report for the 1998-2000 Triennium. However,
that report contains no details of Notre Dame's operating grants.
It is not yet known whether these funds will be obtained by
transferring resources from existing programs.
Amendments to the Higher Education Funding
Item 1 adds the name of the University of Notre
Dame Australia to the list of higher education institutions covered
by the Higher Education Funding Act 1988. The list is in
two parts. Table A lists the institutions that receive triennial
operating grants. Table B lists the institutions that receive
grants for limited operating purposes only. Generally, grants to
institutions listed in Table B are provided on an annual basis for
teaching activities, although expenditure on equipment and minor
building purposes is permitted. For more detail on the distinction
between Tables A and B, refer above to the Background section under
'Funding of the University of Notre Dame Australia' (page 6). For
both Tables A and B, the Minister has the power to determine the
amount of the grant to each institution, taking into account the
educational profile of the institution.
The original Bill proposed including the
University of Notre Dame Australia in Table B. However, an
amendment moved on behalf of the Government on 11 November 1998
will have the effect of placing the University in Table A.
Item 2 changes the heading of
Chapter 2 of the Act from 'States Grants for Higher Education
Assistance' to 'Grants for Higher Education Assistance'.
Item 3 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 $2 million
from $3,860 million to $3,858 million, and legislates amounts of
$3,266.5 million for 1999 and $3,124.5 million in 2000.
Item 4 amends the section of
the Principal Act that deals with the conditions applying to
operating grants and grants for limited operating purposes. The
effect of item 4 is to exempt the University of
Notre Dame Australia from the condition that it does not charge any
student fees. This will ensure that full fee paying students may
still enrol at the University of Notre Dame Australia.
Item 5 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 6 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 7 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 $468 million is
prescribed in 1999 and $418 million in 2000.
Item 8 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 9 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 10 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.
Item 11 exempts fee paying
students at the University of Notre Dame Australia from paying
The amendment proposed by Item
12 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.
- For more detail on the provisions refer to Bills Digest No. 128
1997-98 Higher Education Legislation Amendment Bill 1997
30 January 1998.
- For more detail on the provisions refer to Bills Digest No. 9
1998-99 Higher Education Legislation Amendment Bill (No.1)
1998 20 August 1998.
- 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.
- 'Overseas students defy crisis', Australian, 4
November 1998, 2.
- 'Australian universities unaffected by crisis in Asia', Dorothy
Illing, Age, 5 November 1998, A4.
- 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.
Rosemary Bell and Kim Jackson
17 November 1998
Bills Digest Service
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