Higher education research and teaching

Budget Review 2020–21 Index

Dr Hazel Ferguson

Funding trends  

According to Budget Strategy and Outlook Budget Paper No. 1: 2020–21 (p. 6-17) higher education expenditure is expected to increase by 17.2 per cent in real terms from 2019–20 to 2020–21, then decrease in real terms from 2020–21. Parliamentary Library analysis (Figure 1 below) shows that by 2023–24, real higher education funding (in June 2020 dollars) is projected to return to approximately the same level it was in 2010–11.

This analysis includes higher education course subsidies for domestic students through the Commonwealth Grant Scheme (CGS), Research Block Grants (RBG) to support higher education research, and a range of smaller grants for other purposes such as equity funding. It does not include research funding not administered by the Department of Education, Skills and Employment (DESE), such as Australian Research Council (ARC) competitive grants, or DESE expenditure on research capacity.

The 2020–21 funding increase primarily reflects temporary additional research funding in 2020–21, which is being provided in response to financial challenges caused by the COVID-19 pandemic. The cessation of transitional funding provided as part of changes to the CGS introduced in the Higher Education Support Amendment (Job-ready Graduates and Supporting Regional and Remote Students) Bill 2020 (the JRG Bill), also contributes to declining funding after 2023.

Figure 1: Australian Government estimated expenditure on higher education, 2003–04 to 2023–24 ($ million)

Line graph showing Australian government estimated expenditure on higher education 2003-04 to 2023-24

Sources: Parliamentary Library estimates based on Australian Government, Budget strategy and outlook: budget paper no. 1: 2020–21; Australian Government, Final budget outcome, various years.

Note: Real funding has been calculated by the Parliamentary Library by deflating the nominal expenditure figure by the June quarter CPI, this methodology may differ to that presented in the Budget papers. Figures are in 2019–20 dollars, the last available year of actual figures.

Research funding

Background—questions about the sustainability of university research funding

The Australian Government operates a ‘dual funding system’ for university research, made up of:

While this approach is generally supported, funding levels have long been debated. For example, the 2018 Inquiry into Funding Australia’s Research by the House Standing Committee on Education, Employment and Training reported (among other things) concerns about what some see as a long-running problem of insufficient funding for the indirect costs of government-funded research. Attempts to improve funding levels, including a new block grant component announced in the 2009–10 Budget in response to a recommendation of the 2008 Review of Australian Higher Education (p. 83), have not led to sustained funding growth in real terms, according to data compiled in the Science, Research and Innovation Budget Tables.

Universities ordinarily make up any gap between Australian Government research funding and their overall research investment predominantly from general university funds. In 2018, 56.1 per cent of all higher education research and experimental development expenditure (or $6.8 billion of a total $12.2 billion) was from this source.

Overseas student fees make up a large part of general university funds, and have been estimated to account for around 27 per cent of total university research expenditure, or about $3.3 billion, based on 2018 figures. In 2020, however, border closures due to COVID-19 interrupted global student mobility. Modelling from the Melbourne Centre for the Study of Higher Education (p. 1) suggests that as a consequence, universities face a shortfall of discretionary income available for research of $6.4 to $7.6 billion from 2020 to 2024, resulting in a possible reduction of the university research workforce by 11 per cent.

Australian Government funding for teaching domestic students is also used to partly subsidise university research. As outlined in the 2011 Higher Education Base Funding Review: Final Report (p. 2), this has historically been regarded as an important mechanism to provide universities with ‘a base capacity to undertake research, in appropriately resourced facilities’. The latest estimates (p. xiii) show universities spend, on average, approximately 10 per cent of teaching funding on non-teaching functions (including, but not limited to, research). The JRG Bill, which passed the Senate on 8 October 2020, seeks to change this arrangement by reducing average per-student funding for teaching and aligning funding more closely to average teaching costs.

At the same time, the Higher Education Legislation Amendment (Provider Category Standards and Other Measures) Bill 2020 also seeks to introduce a framework to impose research quality requirements as a condition of university registration.  

Budget research package

The centrepiece of the 2020–21 Budget for higher education is the anticipated university research investment, outlined in the JobMaker Plan—Research Package in Budget Measures Budget Paper No. 2: 2020–21 (p. 79) ‘to safeguard Australia’s research sector against the impact of the COVID-19 pandemic’.

Additional funding through the Research Support Program in 2020–21

The largest component of the research package is a one-off $1.0 billion increase in RBG funding through the RSP in 2020–21, slightly more than doubling estimated RSP expenditure for the year, as shown in Table 1 below. The RTP is not affected by this measure. Recipient institutions are responsible for determining which projects, researchers, equipment and infrastructure to support with RSP funding.

Table 1: Research Block Grants, estimated expenses, 2019–20 to 2023–24

$ million 2019–20 2020–21 2021–22 2022–23 2023–24
RSP 902.1 1 918.3 926.5 929.3 938.1
RTP 1 036.3 1 055.0 1 064.4 1 067.6 1 077.7

Source: Australian Government, Portfolio budget statements 2020–21: budget related paper no. 1.4: Education, Skills and Employment Portfoliop. 57.

RBG funding is distributed between all public and private universities. However, as shown in Table 2 below, RBG allocations have historically skewed heavily towards the research-intensive Group of Eight (Go8) universities: the Australian National University; University of Adelaide; University of Melbourne; Monash University; University of Queensland; University of Sydney; University of New South Wales; and University of Western Australia.

This is largely due to the performance-based funding methodology, which rewards past success and makes it challenging for less-successful universities to build capacity. In recent years, a ‘RSP safety net’ has also maintained stability in allocations by guaranteeing that no university receives less than 95 per cent of its funding for the prior year. The DESE RSP webpage indicates that the safety net will not be applied to the additional RSP funding announced in the Budget.

Table 2: Research Block Grant allocations by university affiliation, 2016–20

$ million 2016 2017 2018 2019 2020
Go8 1 145.7 1 194.8 1 212.4 1 207.8 1 228.4
Go8 % of total 63.1 63.2 63.1 62.9 62.8
Innovative Research Universities (IRU) 171.7 178.4 182.0 183.0 184.2
IRU % of total 9.5 9.4 9.5 9.5 9.4
Australian Technology Network (ATN) 136.4 142.8 144.5 146.4 151.0
ATN % of total 7.5 7.6 7.5 7.6 7.7
Regional Universities Network (RUN) 56.4 57.1 57.9 58.8 61.0
RUN % of total 3.1 3.0 3.0 3.1 3.1
16 non-aligned universities 304.3 317.8 324.3 325.1 331.1
Non-aligned % of total 16.8 16.8 16.9 16.9 16.9
Grand total 1 814.4 1 890.8 1 921.1 1 921.1 1 955.7

Source: DESE, RBG allocations time series, last modified 18 December 2019 and Parliamentary Library estimates.

Other measures

The research package also contains a number of relatively smaller measures:

  • $20.0 million over four years from 2020–21 for the University of Adelaide to establish a Centre for Augmented Reasoning
  • $61.1 million over three years from 2020–21, for new research infrastructure investments, as part of the 2020 Research Infrastructure Investment Plan, to continue implementation of the 2016 National Collaborative Research Infrastructure Strategy
  • $41.6 million over four years from 2020–21 for a Strategic University Reform Fund (SURF) for university industry partnerships and
  • $5.8 million in 2020–21 for DESE to scope possibilities for a University Research Commercialisation Scheme (URCS).

According to DESE, both the SURF and the possible URCS will aim to improve university to business collaboration. This is part of a history of efforts to address Australia’s level of business funding of R&D performed by higher education, which is consistently below the OECD average. For example, the 2015 National Innovation and Science Agenda included changes to the RBG funding calculations (implemented from 2017) in response to the 2015 Review of Research Policy and Funding Arrangements (pp. 16–26) recommendation that the block grants provide more incentive for engagement with businesses and other ‘end users’. Despite this, larger scale collaboration incentives for business, such as the proposed collaboration premium for the R&D tax incentive, have not been included in the Budget. The R&D tax incentive is discussed in detail elsewhere in this Budget Review.

Learning and teaching funding

Commonwealth supported places

Significant changes to higher education funding for teaching were announced in the Job Ready Graduates Package (JRG Package) in June 2020, and included in the July 2020 Economic and Fiscal Update (pp. ). The Budget does not substantially alter these arrangements.

As discussed in the Parliamentary Library’s Bills Digest for the JRG Bill, the JRG Package aims to provide a means to increase the number of Commonwealth supported places (CSPs) funded through CGS. However, some policy experts, such as Andrew Norton (p. 2) and Mark Warburton (pp. 2–4), have expressed doubts about the prospect of additional places being provided by these changes in the short term.

Additional places have been announced in the Budget as outlined in Budget Paper No. 2 (pp. 77–8):

  • Funding of $298.5 million over four years from 2020–21 is provided for 12,000 additional CSPs. However, these will be limited to students studying in ‘national priority areas’. Budget Paper No. 1 (p. 1-24) identifies these as undergraduate places, with study areas to be ‘prioritised according to labour market need, skills gaps, industry engagement and expected student demand’. Information on the DESE Budget webpage suggests these places could be provided as part of the JRG Package investment in national priorities, which will see the additional CSPs allocated through a competitive application process.
  • Short course funding, originally announced as part of the April 2020 COVID-19 Higher Education Relief Package, will also be expanded, with $251.8 million over two years from 2020–21 provided for 50,000 more short course places. Budget Paper No. 1 (p. 1-24) says that these will be provided online, ‘in areas such as teaching, health, science, information technology and agriculture and will provide faster training pathways and alternative study options for workers looking to retrain or upskill’.

However, as shown in Table 3 below, CGS funding is projected to fall below its 2019–20 level in 2023–24, once the transitional CGS funding arrangements in the JRG Package conclude at the end of 2023.

Table 3: Commonwealth Grant Scheme, estimated expenses, 2019–20 to 2023–24

$ million 2019–20 2020–21 2021–22 2022–23 2023–24
CGS 7 137.1 7 545.3 7 531.0 7 208.7 7 117.9

Source: Australian Government, Portfolio budget statements 2020–21: budget related paper no. 1.4: Education, Skills and Employment Portfoliop. 44.

Student mobility

Funding of $2.0 million over four years from 2020–21 has also been provided to support short-term student exchanges (once borders re-open) between universities in Australia and 16 countries in Asia (Budget Paper No. 2, p. 76).

Stakeholder response and concluding comments

There have been major upheavals in Australian higher education in 2020, largely as a consequence of COVID-19. This Budget goes some way to addressing the most urgent issues, such as short-term research funding shortfalls and demand for CSPs. Key sector interest groups such as Universities Australia (UA), the Go8, and the IRU have welcomed the additional research funding, while UA and the ATN are supportive of the additional subsidised places.

Budget Paper No. 1 (p. 2-6) indicates that this Budget assumes a gradual return of international students ‘through the latter part of 2021’. If borne out, this may improve the sector’s stability. However, many issues remain unresolved, not least the longer-term sustainability of research funding, the possible effects of the JRG Package, and the exact shape and size of international education in coming years.   


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