Current Issues

Higher Education Funding Policy

E-Brief: Online Only issued December 2000; updated 2 July 2003

Dr Kim Jackson, Analysis and Policy
Social Policy Group

Key Sites

This brief contains background information on Commonwealth higher education funding policy, as well as providing links to relevant documents and sites on the Internet.

Department of Education, Science and Training

The most important sites on this subject are those of the Department of Education, Science and Training (DEST) and, in particular, the Higher Education pages. The following list summarises the higher education information available from the DEST site:

• the structure and functions of the Higher Education Group, with senior staff contacts
• the Programmes page contains an alphabetical list of links to higher education schemes, activities, initiatives, guidelines and programmes
• the Courses page has links to universities, guides and other information for students
• the Scholarships page, with information on fellowships, awards and scholarships available for students in Australia
• the Universities page has a brief description of the sector and the funding framework
• the Statistics page contains links statistical sources on higher education
• the Research page has descriptions of the funding programmes for higher education research
• the HECS page contains information on the Higher Education Contribution Scheme
• the Publications page provides access to the reports and publications of the Higher Education Division and related bodies (most of which can be downloaded)
• the Higher Education Quality page provides information on quality assurance and accreditation procedures for the sector

The single most useful source of information on current Commonwealth funding policy is the Higher Education Report for the 2003 to 2005 Triennium.

The Australian Vice-Chancellors Committee

The Australian Vice-Chancellors' Committee (AVCC) site provides access to:

• the organisation's media releases and policy statements (including budget submissions and discussion papers)
• other online resources such as funding tables, statistics of undergraduate applicants and unmet demand
• information about individual universities and links to their sites

Recent Developments

The 2003 04 Budget Announcements

The Government announced major changes to the higher education funding system in the 2003 04 Budget. Documents detailing these policies can be obtained from the DEST site, Our Universities: backing Australia's future. This provides a summary of the reforms, a policy paper, fact sheets and other information. The major funding decisions are described below. It should be noted that most of these proposals will require the approval of Parliament, as new legislation will be required.

A New Commonwealth Grant Scheme

From 2005 Commonwealth operating grants for universities will be based on a new funding formula based on student numbers and discipline mix. Funds per student place will be increased by 2.5 per cent in 2005, 5.0 per cent in 2006 and 7.5 per cent in 2007. These increases will be conditional on institutions complying with the Commonwealth's model for institutional governance ('National Governance Protocols') and workplace relations policies. Around 25000 marginally funded places will be converted to fully funded places in the three years to 2006 07. An additional 1400 places will be provided in 2007. The total additional cost of these measures will be $139 million in 2004 05, $252 million in 2005 06 and $384 million in 2006 07.

From 2004 the Government is providing $122.6 million over four years to incorporate a regional loading into the Commonwealth Grants Scheme. Students attending regional campuses will attract additional payments for the institution depending upon the location and size of the campus.

Changes to HECS

From 2005, institutions in receipt of Commonwealth supported places will determine their own student contribution level for each course they offer within ranges set by the Commonwealth. Currently there are three HECS bands, each with a fixed rate of student contribution. From 2005 these fixed rates will be replaced by ranges. The top of these ranges will be 30 per cent higher than the projected level of HECS for each band for 2005 under current arrangements. The bottom of each range will be $0. Institutions will be able to set the student contribution at any point within these ranges. In addition, a fourth band will be established called National Priorities, which will consist of education and nursing courses. The range for this band will be from $0 to the current level of HECS for Band 1 ($3854).

The minimum repayment threshold for HECS will be raised to $30 000 by removing the two bottom repayment bands. This means that those with a HECS debt will start paying 4 per cent of their income when they reach $30 000, whereas they now pay 3 per cent when their income reaches $24 365. In addition, the maximum rate of repayment will be raised to 8 per cent where income exceeds $60 000 (the top rate is currently 6 per cent where incomes exceeds $43 859). The Government has also reduced the discounts for upfront payments (from 25 to 20 per cent) and voluntary repayments (from 15 to 10 per cent).

Support for Students

Domestic students paying full fees for undergraduate courses will have access to an income contingent loan scheme (FEE-HELP). Loans will also be available for students who wish to study overseas (OS-HELP). There will be a scholarship scheme to assist low SES and indigenous students with higher education costs (the Commonwealth Education Costs Scholarship), and one to assist students from rural and isolated areas who have to move in order to study (the Commonwealth Accommodation Scholarship).

Reactions to the Policy Statement

On 26 June 2003 the Senate referred the budget decisions to the Employment, Workplace Relations and Education References Committee. The terms of reference and other information can be obtained from this page. The committee is due to report by 30 October 2003.

The AVCC has issued a media release and a paper, Excellence and Equity: foundations for the future of Australia's universities (pdf file) in response to the Government's policy statement. The AVCC strongly endorsed the thrust of the policies, while identifying some weaknesses. These included the lack of effective indexation, the tying of funding to major changes in governance and workplace relations, the increased capacity for Government intervention in university decisions and autonomy, and the need for stronger equity initiatives.

The Group of Eight, an association of Australia's major research universities, stated that the reform package provided Australia with a once in a generation opportunity to create an internationally competitive higher education sector. The Group's submissions for the Higher Education Review and the Budget can be obtained from this page.

The National Tertiary Education Union has strongly criticised the package. Media releases on the subject can be obtained from this page. The NTEU also has a page of documentation relating to the Higher Education Review.

The Council of Australian Postgraduate Associations (CAPA) has opposed the increases in fees, interest rates and industrial relations measures. Media releases on these subjects can be obtained from this page.

The National Union of Students has announced a campaign to oppose the package.

The Review of Higher Education

The Budget decisions were informed by a review of higher education policy, which was announced by the Minister for Education, Science and Training, the Hon. Dr Brendan Nelson, in April 2002. The review carried out 49 forums in all capital cities between 13 August and 25 September 2002. Seven issues papers were published and a total of 728 submissions were received. The papers were as follows:

• Varieties of Learning: the interface between higher education and vocational education and training (19 August 2002)
• Meeting the Challenges: the governance and management of universities (14 August 2002)
• Achieving Equitable and Appropriate Outcomes: indigenous australians in higher education (6 August 2002)
• Varieties of Excellence: diversity, specialisation and regional engagement (31 July 2002)
• Setting Firm Foundations: financing australian higher education (25 July 2002)
• Striving for Quality: learning, teaching and scholarship (21 June 2002)
• Higher Education at the Crossroads: an overview paper (26 April 2002)

Media releases associated with the review can be obtained from this page.

The Productivity Commission Report

In December 2002 the Productivity Commission released its research report, University Resourcing: Australia in an international context (pdf file). The report was requested by the Government as an input into the Review of Higher Education. It compared 11 Australian universities with 26 universities from nine other countries. Its major conclusions were as follows:

• graduation rates for Australian medium-duration first degree courses in 1999 were in the middle of the range among the OECD countries examined.
• the ratio of students to teaching staff was higher in Australia in 1999 than in Canada and the United States, the only other countries for which there were comparable data.
• salaries for Australian academics in 2001 measured on a Purchasing Power Parity basis were comparable to those in a number of other countries, although lower than in Singapore and the United States.
• the total expenditure (public and private) on tertiary education in Australia was around 1.5 per cent of Gross Domestic Product in 1999. This was lower than in the United States, New Zealand, Sweden and Canada, but higher than in the United Kingdom and some other European countries.
• university tuition fees in public universities are regulated in all countries except New Zealand. However, public university students in Sweden do not pay tuition fees, and first-time undergraduates do not pay tuition fees in Ireland.
• demand (through student places) is regulated in all countries except New Zealand and some states of the United States.
• the Australian universities studied generally received the largest share of their revenue from government. For over a third of the overseas universities studied, revenue from other sources including gifts, donations, investments and commercial activities accounted for a greater proportion of revenue than from either government or students.
• the Australian universities studied typically received a greater share of their revenue from students than did universities in other countries.

Background

Constitutional Position

Under the Constitution the provision of educational services (including universities) is a responsibility of State Governments. Section 107 provides that the States will retain those powers that they had before the establishment of the Commonwealth, unless the Constitution exclusively vested the power in the Commonwealth. As the Constitution does not exclusively vest the power to make laws regarding education with the Commonwealth, this power remains with the States. However section 51 of the Constitution, which lists those matters for which the Commonwealth may make laws, does refer to the provision of 'benefits to students' (s. 51xxiiiA). This amendment to the Constitution was inserted in 1946 to enable the Commonwealth to continue to provide welfare benefits, including income support for students. Under s. 51xxxix the Commonwealth can also make laws with regard to 'matters incidental to the execution of any power' vested by the Constitution. The extent to which the 'benefits to students' head of power and the 'matters incidental' provision could be used as a basis for broad Commonwealth actions in the education area is a matter for debate.

Under section 96 of the Constitution the Commonwealth can grant financial assistance to a State on such terms and conditions as the Parliament thinks fit. This has been the traditional vehicle for Commonwealth assistance for educational activities conducted by the States. Grants to the States for universities commenced in 1951 and for schools in 1964. However, since the passage of the Higher Education Funding Act 1988 the Commonwealth has provided financial assistance directly to universities rather than through the States. The constitutionality of this arrangement has not been tested in the courts, although it would presumably be justified on the basis of the Commonwealth's appropriations power (s. 81).

The Commonwealth also has power to make laws with regard to 'trading or financial corporations' (s. 51xx). As universities are generally corporate bodies then it might be argued that this corporations power could be used as a basis for Commonwealth legislation concerning their activities.

The Mills Committee

In March 1950 the Menzies Government appointed a committee (the Mills Committee) to report on the finances of universities. It recommended that the Commonwealth Government contribute towards the universities' recurrent expenditure. This was accepted and subsequent States Grants (Universities) Acts of 1951, 1953, 1955, 1956 and 1957 provided financial assistance to the States for the running expenses of universities, on the condition that the level of university income from State grants and fees was maintained at certain levels. The Mills Committee, on the basis of weighted student numbers, allocated each university a 'first level' grant for which they could qualify by receiving a minimum income of State grants and fees. Universities could also qualify for a 'second level' Commonwealth grant equivalent to 1 for every 3 of State grants and fees above the set minimum income.

The Murray Committee

Continuing concern over the condition of the universities led Prime Minister Menzies to establish the Murray Committee in December 1956 to report on the sector. In response to the committee's recommendations, the Government announced the establishment of permanent Australian Universities Commission (AUC), greatly increased recurrent grants and the introduction of capital funding. The function of the Commission was to inquire into and make recommendations on financial assistance to the States for universities. The additional recurrent assistance for universities had the effect of altering the ratio of Commonwealth grants to State grants and fees from 1:3 to 1: 1.85. Other recommendations led to the introduction of triennial funding and the provision of capital grants on a 1:1 basis with State funding.

Australian Universities Commission

The creation of a permanent body to oversee the distribution of grants to universities resulted in a more sophisticated approach to recurrent funding. The method of assessment used by the Commission involved the estimation of the fixed elements of expenditure on the teaching and research components of total expenditure for each major faculty and the marginal expenditures (that is, the extra expenditure involved in enrolling an additional student) in major faculty groups. The remaining items of expenditure covering central administration, the library and the maintenance of physical facilities were assessed in terms of a fixed component and a component varying with expenditure on teaching and research.

The AUC developed a formula incorporating these factors and this continued to be used in the 1970s and early 1980s by the AUC's successor, the Tertiary Education Commission. The precise nature of this formula was not disclosed in the reports of these bodies and it was not until 1993 that it was published.

The Martin Committee

In August 1961, at the request of the AUC, the Government established the Committee on the Future of Tertiary Education in Australia (Martin Committee). The Committee was asked to consider the pattern of tertiary education in Australia in relation to the needs and resources of the country. At that time the tertiary sector consisted of four main types of institutions: universities, institutes of technology or technical colleges, teachers' colleges, and specialist institutions (generally agricultural or paramedical colleges). The Martin Committee considered that technical education was undervalued. It recommended an increase in financial support for colleges, the separation of recreational and trade courses from those concerned with general education and the technologies and the establishment of standards recognised throughout the country. In response, the Commonwealth agreed to support financially a new system of colleges of advanced education (CAEs) parallel to the universities, although they were to remain primarily a State responsibility. The States Grants (Advanced Education) Act 1966 introduced capital and recurrent grants for CAEs, while the States Grants (Teachers Colleges) Act 1967 provided capital and equipment grants for these institutions. In 1971 the Australian Advanced Education Commission was established to advise the Commonwealth and promote the development of the sector.

The 1973 Higher Education Agreement with the States

In March 1973 the Prime Minister wrote to the State Premiers proposing that the Commonwealth assume full financial responsibility for universities, colleges of advanced education and teachers' colleges. This would occur in conjunction with the abolition of tuition fees. At the Premiers Conference and Loan Council Meeting of 28 29 June 1973 the States accepted the Commonwealth proposal. There was no detailed published agreement beyond the Statement by the Prime Minister attached to the Proceedings of the Conference. This statement simply noted that the States had accepted the Commonwealth offer to take over full financial responsibility from 1 January 1974 and that an amount equivalent to the additional grants for tertiary education would be deducted from the general purpose funds provided by the Commonwealth to the States.

The agreement did not entail any changes to the relative constitutional responsibilities of the States and the Commonwealth regarding universities and other higher education institutions. However, the Commonwealth's assumption of funding responsibility gave it a dominant position in the development of higher education policy. Through the conditions it attached to university grants it was able to determine the nature and characteristics of the system most notably with the establishment of the Unified National System (UNS) and the introduction of the Higher Education Contribution Scheme (HECS) in 1989.

Government Guidelines and the Establishment of the TEC

Commonwealth assistance for the university and advanced education sectors after 1974 continued in the form of triennial grants under States Grants legislation, with the level and distribution of grants based on recommendations by the University and Advanced Education Commissions. However, in May 1975 the Government announced that it would merge the two commissions. Another major change occurred with the 1975 Budget, when the Government stated that 1976 would be a year outside the normal triennial round and issued guidelines to the Commissions stipulating the funds available for the sectors.

These developments continued with the Fraser Government. In June 1977 the two higher education commissions (as well as the Technical and Further Education Commission) were abolished and replaced by the Tertiary Education Commission (TEC), with subsidiary Councils for the three tertiary education sectors. While the TEC, like its predecessors, advised the Government on matters relating to tertiary education and administered programmes of financial assistance, its recommendations were constrained by government guidelines setting out broad policy objectives and financial limits.

The TEC continued the approach developed by the AUC for assessing the general recurrent grant for each university. This involved consideration of the following factors:

• the total student load, expressed as broad planning ranges
• the distribution of students across disciplines and the size of each faculty
• the provision required for research and the necessary administrative and other services

In the advanced education sector TEC determined the total number of students and their mix in terms of institution and fields and levels of study after consultation with State authorities. The allocation of funds to institutions was generally in accordance with the recommendations of these authorities.

Most recurrent funds for institutions in both sectors continued to be provided in the form of 'block grants' for general purposes (i.e. subdivision of the allocation remained the responsibility of the institution itself), while capital grants were provided for specific building projects (whose priority was determined by the TEC).

The National Board of Employment, Education and Training

In April 1988 the Minister for Employment, Education and Training (Mr Dawkins) introduced legislation to rationalise the advisory structures in his portfolio. The TEC and the Schools Commission were abolished and replaced by the National Board of Employment, Education and Training (NBEET). The new arrangements were established by the Employment, Education and Training Act 1988. Their essential features were as follows:

• a National Board to report directly to the Minister on all related employment, education and training issues taking into account any written directions or guidelines from the Minister on the Government's broad social, economic and budgetary policies
• four Advisory Councils reporting to the Board (the Schools Council, Higher Education Council, Employment and Skills Formation Council and the Australian Research Council)

The new Board would not make annual recommendations on the allocation of grants to institutions and would have no responsibility for programme delivery. These tasks became the responsibility of the Department. Only the Australian Research Council (ARC), with its specialist role of recommending grants for research projects, retained a direct role in higher education funding processes. NBEET was later abolished.

The Shift to Departmental Administration of Grants

Since the Commonwealth assumed responsibility for funding higher education in 1974, responsibility for the allocation and administration of grants gradually shifted from statutory commissions representing the sector to the Minister and the Department. While this development has often been criticised by stakeholders in the sector, it has nevertheless continued under both Labor and Coalition governments as they try to ensure that higher education policy and funding requirements remain consistent with their overall social and economic objectives. Ministerial authority was ultimately entrenched with the passage of the Higher Education Funding Act 1988, which enabled the establishment of the Unified National System and this legislation remains the basis for Commonwealth involvement in the sector.

The Unified National System

The Unified National System (UNS) was introduced in 1989 following the publication of the White Paper Higher Education A Policy Statement in July 1988. The distinction between the universities and colleges of advanced education was abolished. All institutions could become members of the UNS if they met certain size criteria (a minimum of 2000 equivalent full-time student units, or EFTSU). Membership of the UNS was necessary if an institution was to be eligible for the full range of Commonwealth grants. Non-members would be funded on a contract basis for teaching purposes only. This led to a significant reduction in the number of institutions through amalgamations: from 75 Commonwealth funded separate institutions in 1989 to 36 members of the UNS and 8 non-members in 1991.

The White Paper also introduced significant changes in funding procedures:

• an analysis of the relative funding of institutions and an adjustment package to remove any inequities
• a single operating grant to replace the existing general recurrent, equipment and minor works and special research grants
• additional operating grants for enrolment growth to be allocated on a competitive basis, with regard to institutional capacities in key disciplines of national priority, as well as relative rates of student participation and demand in States and regions
• a shift of research funds from general infrastructure funding to competitive research schemes
• introduction of the 'education profile' process whereby institutions develop a profile which defines their broad mission and responsibilities, with specified areas of activities and goals. The profile is negotiated with the Commonwealth and becomes the basis on which it receives funding.

The Higher Education Funding Act 1988

The statutory basis for the Unified National System was the Higher Education Funding Act 1988. The Act provided grants of financial assistance to higher education institutions, and established the Higher Education Contribution Scheme (HECS). The Minister's Second Reading Speech can be obtained here. The Act remains the basis for Commonwealth funding of higher education institutions.

The Act represented a fundamental change in Commonwealth funding policies. It made institutional funding a direct Ministerial responsibility and established a structure to ensure that institutions were responsive to policy guidelines (the 'education profiles' process). Under this process, individual institutions negotiate agreements with the Department which form the basis for their funding. Section 14 of the Higher Education Funding Act requires higher education institutions to submit education profiles in an approved form as determined by the Minister after consultation with the institution. Whereas the States Grants (Tertiary Education Assistance) Acts had stipulated specific operating grants for individual universities, the Higher Education Funding Act 1988 simply provided that an institution should receive 'such amount as the Minister determines having regard to the education profile of the institution' (s. 15), and set global maxima for this discretionary funding.

The new system was also open to the charge that it could be subject to political manipulation and a lack of accountability. Unlike Commonwealth funding for schools, which is governed by known formulae and public processes, grants for higher education institutions were to be determined largely in confidential negotiations without the benefit of fixed arithmetic criteria. To safeguard against possible abuse of this process the Senate amended the Employment, Education and Training Act 1988 to require the Higher Education Council to report annually on the operation of the education profiles process after consulting with institutions. All of these reports can be accessed from this page. However, the Employment, Education and Training Amendment Act 2000 removed this reporting requirement when it abolished the Council.

The Relative Funding Model

The White Paper on Higher Education had made it clear that there would be a new method for allocating grants to institutions that would remove the funding inequities that had arisen over time. It foreshadowed an analysis to identify those institutions that were significantly over-funded or under-funded under current arrangements, followed by phased adjustments to the level of funding.

The analysis of the relative funding position of institutions was finalised in August 1990. The report, Assessment of the Relative Funding Position of Australia's Higher Education Institutions, compared the actual operating grants received by institutions with notional allocations derived from a Relative Funding Model. The Model was a simple matrix comparing relative teaching costs across disciplines and course levels. The application of the model revealed a huge variation in grants per student across institutions, from 20 per cent above the model allocation (Northern Territory University) to 22 per cent below (University College of Southern Queensland).

The model was applied to the funding process by means of an 'adjustment package' negotiated with each university. These packages contained a mixture of funding and student load increases/decreases (depending upon whether an institution was over or under funded according to the model) that would bring each institution to within a specified bandwidth of the model's funding level by 1994. The bandwidth was set at plus or minus three per cent. Two institutions that remained outside the bandwidth in 1995, the Northern Territory University and University of Tasmania, were accepted as special cases.

The model was designed for a once-only application to redistribute recurrent funding between institutions. Since this base level was established, approved funding for growth has been added as appropriate. Once growth has been allocated it becomes part of the 'base' for the following year of the rolling triennium.

HECS and Tuition Fees

With the abolition of tuition fees in 1974, higher education institutions became almost wholly dependent on the Commonwealth for their operating expenditure. Funding legislation prevented institutions that received grants from charging tuition fees, and the Higher Education Funding Act 1988 in its original form continued this prohibition. However, student charges of various kinds reappeared throughout the 1980s:

• from 1980 overseas students were required to pay annual charges (the Overseas Student Charge). These were initially equivalent to about 40 per cent of the cost of their courses.
• from 1986 institutions were permitted to offer full fee places to overseas students.
• in 1987 and 1988 Australian students were required to pay an annual charge of $250 (the Higher Education Administration Charge).
• from 1989 institutions could charge regulated fees for certain types of postgraduate courses. This market was progressively deregulated so that by 1994 universities were able to charge fees for most postgraduate courses and to determine the level of fees they charged.
• from 1989 Australian undergraduates were required to make a contribution through the Higher Education Contribution Scheme (HECS).

HECS was established by the Higher Education Funding Act 1988. Under section 38, financial assistance is granted to higher education institutions on the condition that institutions comply with the requirements of the HECS. The scheme requires students to make a financial contribution towards the cost of their course. Students can pay up-front and receive a discount, or they can elect to have the Commonwealth pay the contribution for them and repay the debt through the tax system as their income reaches certain levels. A detailed brief on HECS prepared by the Parliamentary Library is available at this page.

The Higher Education Budget Statement of 9 August 1996 announced that universities would be able to charge full cost fees for Australian undergraduates from 1998 onwards. This only applied to students above the target number of Commonwealth-funded places, with the number of fee-paying Australian undergraduates being initially limited to 25 per cent of the total enrolment of Australian undergraduates in any one course.

Because of these developments, the university sector is now more reliant on student contributions than it was in the years before the Second World War, when the system was quite small and the Commonwealth was not involved. This is illustrated in the table below.

Table 1: University Income by Source, 1939 2001

(a) 'Other' includes donations and bequests, investment income, other research grants and contracts.

Sources: Selected Higher Education Statistics 1992; Selected Higher Education Finance Statistics (annual); National Report on Australia's Higher Education Sector, 1993, p. 75.

The 1996 Higher Education Budget Statement

The Higher Education Budget Statement of 9 August 1996 introduced some major changes to funding arrangements for higher education. These were as follows:

• reductions in operating grants equivalent to 1 per cent in 1997, a further 3 per cent in 1998, and a further 1 per cent in 1999 (a cumulative 4.9 per cent reduction by 1999). It should be noted that these reductions were to the forward estimates, rather than to the current grants, and that the 1997 operating grants were actually higher than those for 1996. The estimated reductions to outlays were $23.4 million in 1996 97, $118.5 million in 1997 98, $215.5 million in 1998 99 and $266.2 million in 1999 00. The reductions were applied through a fixed proportional reduction to the forward estimates of the operating grant of each institution.
• introduction of an increased, differential rate of HECS contribution to apply to students undertaking new courses after 1 January 1997.
• lower repayment thresholds for HECS. The new repayment levels were applied to all those with an existing HECS debt as well as new students. The reductions to Commonwealth outlays from this change were estimated at $229.9 million in 1997 98, $269.7 million in 1998 99 and $317.8 million in 1999 00.
• removal of the prohibition on tuition fees for Australian undergraduate students. This only applied to students above the target number of Commonwealth-funded places, with the number of fee-paying Australian undergraduates being limited to 25 per cent of the total enrolment of Australian undergraduates in any one course.
• end of the Discretionary Funding Programme. The Quality Assurance Programme and the National Priority (Reserve) Fund were merged into the Discretionary Funding Programme in December 1995 following decisions in the 1995 96 Budget. This was justified on the basis that the objectives of the programmes supporting quality and innovation across the higher education sector had converged in recent years. Funding for the former programmes totalled $116.4 million in 1995, which the former Government reduced to $100.8 million in 1996 with further reductions projected for the remainder of the triennium. The 1996 97 Budget ended the programme (for an estimated saving of $84.6 million in 1996 97).

Abolition of NBEET

The Coalition Government's 1996 Higher Education Election Policy stated that it would wind up the National Board of Employment, Education and Training (NBEET), while maintaining the Higher Education Council as an independent body reporting directly to the Minister. The Australian Research Council (ARC) was also to be restructured as an independent body.

In June 1996 the new Government introduced the Employment, Education and Training Bill 1996 to abolish NBEET. Background on this legislation can be obtained from the Bills Digest. The Bill was also the subject of a Senate Committee report and ultimately lapsed with the Parliament. Although the Bill was not passed, from mid-1996 the Board and three Councils wound up their activities in accordance with a request from the Minister. The Higher Education Council and the Australian Research Council continued to operate, with the Board's activities being confined to supporting these Councils. Appointments to the Board and Councils (with the exception of the ARC) were not made as positions fell vacant.

In March 1999 the Government again introduced legislation to abolish NBEET and its Councils, with the exception of the Australian Research Council, stating that its preference was for advice to flow directly to the minister, rather than being filtered through NBEET. The Employment, Education and Training Amendment Act (No.10 of 2000) received assent on 15 March 2000.

The Annual Reports and other publications of NBEET are available from this page.

The West Review and Proposed Reforms to the System

The Government established a major independent review of higher education policy with the focus set on the future of the sector over the next 10 to 20 years. The review was chaired by Mr Roderick West and in April 1998 published its final report, Learning for Life. The report's recommendations included the following:

• public funding to be directed through the student rather than the institution via the medium of a lifetime individual entitlement of public funding for post secondary education
• greater flexibility for institutions to set tuition fees and to determine student numbers
• student access to income contingent loans

The Report of the review, submissions, media releases and other documents can be accessed from this page.

The review process culminated in a Cabinet submission, which included the following proposals:

• abolition of current controls over the number of places a university can offer, allowing students greater choice over where they study
• a universal tuition subsidy which follows the student to accredited higher education courses offered by quality-assured public and private providers
• student fees for tuition set by providers
• a universal loans scheme to help students pay tuition costs, with a real rate of interest and repayable through the tax system on an income contingent basis

Dr Kemp's former higher education adviser, Mr Andrew Norton, has stated that the Minister 'thought the funding and regulatory system so bad it needed to be almost entirely scrapped, but regrettably, when he put his proposal to Cabinet they decided against any structural changes'. The Norton article is available in the Autumn 2000 issue of Policy, the journal of the Centre for Independent Studies, which also contains a number of other articles arguing for a more deregulated system.

On 18 October 1999 Dr Kemp issued a media release 'Higher Education Funding', in which he re-affirmed that the structure of tertiary education would remain unchanged.

Research Funding Reforms

In December 1999 the Government released Knowledge and Innovation: a policy statement on research and research training. The main features of this White Paper were:

• an enhanced role for the Australian Research Council (ARC)
• performance based funding for research and research training in universities
• a new quality verification framework
• a collaborative research programme for rural and regional communities

The Minister issued a media release on the White Paper on 21 December 1999.

The AVCC has responded to the statement, arguing that the policy statement is flawed because of the Government's refusal to accept the need for major additional investment in Australia's research base.

The White Paper was informed by several reviews of DETYA research programmes and processes, namely:

• The Small Grants Scheme Reviewed (August 1997)
• Funding the Nation's Research Base: an evaluation of the Australian Research Council Large Grants Scheme (2000)
• University and Industry Research Partnerships in Australia: an evaluation of ARC/DETYA industry-linked research schemes (1999)
• Phase One Report ARC/DEETYA Targeted Research Grants Allocation Processes (October 1997)

The White paper decisions were implemented by the Australian Research Council Act 2001 and the Australian Research Council (Consequential and Transitional Provisions) Act 2001. The legislation was the subject of a report from the Senate Employment, Workplace Relations, Small Business and Education Legislation Committee in November 2000.

In January 2001 the Government announced its innovation policy, Backing Australia's Ability. This contained a large number of funding initiatives relating to research programmes, including:

• doubling the funding for national competitive research grants
• additional funding for university research infrastructure
• additional funding for research training infrastructure
• additional targeted university places
• a Postgraduate Education Loans Scheme

Descriptions of current DEST higher education research programmes can be obtained from this page.

Industrial Relations and Funding

On 9 November 1999 the Minister issued guidelines for the Workplace Reform Programme. The programme provided up to $259 million over three years to fund pay rises for university staff if the universities implemented significant reforms in workplace relations arrangements, management and administration. Guidelines, grants and media releases relating to the programme can be obtained from this page.

The Australian Higher Education Industrial Association was established in 1990 by higher education institutions to protect their industrial relations interests at State and Federal levels. Its web site provides access to a number of DETYA documents on the Workplace Reform Programme.

The Financial Situation of Universities

The Commonwealth monitors the financial situation of universities through assessments of their audited financial statements. Since 1997 it has contracted the accounting firm Deloitte Touche Tohmatsu to analyse these statements.

The initial report Financial Analysis of Universities' Financial Statements, 1993 1996 is available as a separate publication. The results of subsequent analyses have been reported in the section on 'Prudential Assurance' in the annual higher education triennial funding reports. These are available from this page.

Financial data for the universities is also reported in the annual Selected Higher Education Finance Statistics, the most recent of which relates to 2001 and is available online from this page. It provides a breakdown of revenue and expenditure for each higher education institution.

On 18 September 2002 the Senate referred an inquiry into the financial state of universities to the Senate Employment, Workplace Relations and Education References Committee.

Quality Assurance Framework

In December 1999 the Minister announced the establishment of a new quality assurance framework for the higher education sector. The Australian University Quality Agency was established in March 2000 as an independent body to audit institutions and issue public reports. The Commonwealth, States and Territories consider the reports of the Agency in determining the accreditation status of higher education institutions and their eligibility for public funding.

Information about the framework and links to relevant reports can be obtained from this page. A history of the Commonwealth role in this area is also available.

Statistics, Papers and Other Sites of Interest

Funding Statistics

The Higher Education Report for the 2003 to 2005 Triennium has many tables giving funding levels for individual programs for the current triennium.

The funding tables provided by the Australian Vice-Chancellors' Committee (AVCC) are particularly useful because they present figures for the period 1982 to 2005 adjusted for cost factors. There are also a number of tables which contain per student funding figures. This permits a more accurate assessment of the actual resources available to higher education institutions and funding trends over time. The AVCC publication, Key Statistics on Higher Education (November 2002) reproduces some of this data. The following table summarises the AVCC's table showing Commonwealth resources for higher education since 1983, in constant prices.

Table 2: Commonwealth Resources available to Higher Education Institutions, 1983 2005 (2003 prices)

Source: AVCC, Funding Tables, Table 1. Operating grants include the capital roll-in, Research Training Scheme, and the Institutional Grants Scheme (excluding small grants). Research programmes includes ARC grants.

DEST, Selected Higher Education Finance Statistics contains a breakdown of revenue and expenditure for each higher education institution. The most recent issue, relating to 2001, can be downloaded from this page.

DEST, Selected Higher Education Research Expenditure Statistics contains a breakdown of research expenditure, by institution, field of research, type of activity, source of funds and socioeconomic objectives. The most recent issue, relating to 2000, can be downloaded from this page. Other data in this area is available from the Australian Bureau of Statistics, Research and Experimental Development Australia 1998 Higher Education Organisations (April 2000), although this is not available free online.

Appendix A of Statement 6 of Part 3 of Budget Strategy and Outlook 2003 04 (Budget Paper No.1) contains expense estimates by function. This provides a figure for the Commonwealth's total higher education expenses for each year, 2001 02 to 2006 07. Budget papers for earlier years can be downloaded from this page.

Course Costs

The actual unit costs of higher education courses vary according to the institution, discipline and the level of the course. The Relative Funding Model provided one method of calculating these costs. The paper by Sally Borthwick, Overview of Student Costs and Government Funding in Post-compulsory Education and Training (October 1999) revisited this approach to derive notional teaching unit costs for 1997.

An indication of the relative costs of courses can also be obtained from the annual
HECS and Fees Manual published by DEST. This contains indicative minimum course fees for fee-paying overseas students. Institutions are required to charge fees designed to recover the full economic costs of a course with regard to teaching services, administration and capital facilities, including overheads and common services such as libraries. The indicative minimum course fees approximate these costs for three broad ranges of courses. The following table provides these figures for the 1995 2003 period.

Table 3: Course Costs, 1995 2003 (approximate)

Source: DEST, HECS and Fees Manual (annual). It should be noted that the annual increases in these figures are reflections of movements in the Higher Education Cost Adjustment Factors index maintained by DETYA and not the result of annual surveys.

Other Papers

Bob Lenahan, Gerald Burke and Hing Tong Ma, Selected Asian Economies and Australia: an overview of educational expenditure and participation (1998). This report was commissioned by DEST. Countries examined were China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.

Tom Karmel, Financing Higher Education in Australia (1998). This is a DEST paper prepared for an international conference. It contains a brief history of funding and a discussion of the current pressures on funding structures.

Paul W. Miller and Jonathon J. Pincus, Funding Higher Education Performance and Diversity (December 1997). The proceedings of a conference to discuss university financing.

Ken Back, Dorothy Davis and Alan Olsen, Comparative Costs of Higher Education Courses for International Students in Australia, New Zealand, the United Kingdom, Canada and the United States (September 1997). This report looks at tuition fee costs, living costs and total costs in the five destination countries.

Phil Aungles, Tom Karmel and Tim Wu, Demographic and Social Change: implications for education funding (May 2000). A DEST paper containing funding projections for the next twenty years.

Sally Borthwick, Overview of Student Costs and Government Funding in Post-compulsory Education and Training (October 1999). Covers government funding, unit costs, the cost to individuals and public subsidies to students.

Overseas Sites

The Department for Education and Skills administers education policy in the United Kingdom. In January 2003 the Government released the White Paper, The Future of Higher Education. The Higher Education Funding Council of England is the body responsible for the distribution of grants to higher education institutions in England. There are similar bodies in Wales and Scotland. Universities UK represents the interests of institutions.

The United States Department of Education does not directly fund American colleges and universities. Its focus is on promoting excellence in education by collecting and sharing information and on helping families pay for college.

The New Zealand Ministry of Education site has a Tertiary Education page with links to policy documents and other information. The Government is currently undertaking significant higher education reforms.

In Canada education is the responsibility of the provinces and territories. The
Council of Ministers of Education has a page on post-secondary education with links to research documents and other publications.

The OECD Education page provides access to reports, reviews and other documents. Comparative statistics can be obtained from this OECD page.

The International Comparative Higher Education Finance and Accessibility Project is a three year, Ford Foundation-financed project to study the worldwide shift in higher education costs from taxpayers to students. The project is directed by D. Bruce Johnstone at the State University of New York at Buffalo. The site compares tuition fees and other student costs in various countries, including Australia.

For copyright reasons some linked items are only available to Members of Parliament.

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