Overview

The risks that skills shortages present to a growing economy, compounded by slower productivity growth in recent years, have generated debate about the level and nature of Australia’s investment in education. Australia spends 5.9 per cent of Gross Domestic Product on education, which is a little above the Organisation for Economic Co-operation and Development (OECD) average of 5.7 per cent. However, its public spending share is relatively low—4.3 per cent compared to an OECD average of 5 per cent, placing Australia 22^nd of 29 OECD countries.

Both public and private funding on education in Australia, as in most OECD countries, increased between 1995 and 2004. In many of these countries, the increase in private funding was greater then the increase in public funding. Australia was one of only two countries where the share of public funding decreased by more than 5 percentage points. Over this period it decreased by 6.8 per cent. Australia’s share of total education funding derived from private sources is 27 per cent, which is well over the OECD average of 13 per cent and places Australia third after South Korea and the United States.

The Howard Government implemented policies and funding arrangements that supported growth in the private education sector and increases in private funding. It prioritised parental choice by supporting the establishment of new non-government schools and increasing per capita grants to the schools sector. The result was unprecedented levels of Commonwealth government expenditure on non-government schools, to the extent that it has outstripped expenditure on universities. In higher education, the shift to private funding has been significant. OECD data shows the private share increasing from 35.2 per cent in 1995 to 52.8 per cent in 2004.

Within these settings, the Howard Government more recently focused on national standards in terms of ‘quality of outcomes’ and ‘national consistency’. An issue for the Rudd Government will be assessing the impact of these policy settings on the quality of education that Australia’s schools and universities deliver. In the schools sector, for example, there has been some growth in Commonwealth grants to government schools. However, ensuring adequate resources so that this sector can meet these standards is primarily left to the state and territory governments. Given the higher levels of funding that each successive Commonwealth government appears to be prepared to make available for school education, there may be scope to re-evaluate the established funding paradigm. In the meantime, government schools—and the state and territory governments that run them—continue to bear the responsibility for providing education to all comers under Australia’s compulsory system of education.

Changing education policy settings and expenditure priorities is electorally sensitive because of the institutional and the private interests that have been served. Therefore, it is not surprising that, although education was central to the election campaign, the emphasis was more on expenditure commitments than systemic issues. The following briefs outline some of the more difficult policy issues the Rudd Government will face.