Higher Education

Budget Review 2021–22 Index

Dr Hazel Ferguson

Funding trends

According to Budget Strategy and Outlook Budget Paper No. 1: 2021–22 (p. 170), higher education expenditure is expected to decrease by 8.3% in real terms from 2020–21 to 2021–22, and decrease by 9.3% in real terms from 2021–22 to 2024–25.

The initial decrease represents a return to usual funding levels after the October 2020 Budget added an extra $1.0 billion to university research funding through the Research Support Program in 2020–21, in response to COVID-19. The decline after 2021–22 is largely a consequence of the Higher Education Support Amendment (Job-Ready Graduates and Supporting Regional and Remote Students) Act 2020, which legislated a reduction in average per-student funding for domestic Commonwealth supported students.

Parliamentary Library analysis (Figure 1 below) shows that by 2023–24, real higher education funding (in 2021 dollars) is projected to return to approximately the same level it was in 2009–10—that is, additional university places provided through the Job-ready Graduates Package from 2021 are being provided with no overall increase in estimated higher education funding.

Figure 1: Australian Government estimated expenditure on higher education, 2005–06 to 2024–25 ($ million)

(e) figures are budget estimates.

Note: real funding has been calculated by the Parliamentary Library by deflating the nominal expenditure figure by the June quarter CPI and CPI forecasts from the 2021–22 Budget; this methodology may differ to that presented in the Budget papers.

Sources: Parliamentary Library based on Australian Government, Budget strategy and outlook: budget paper no. 1: 2021–22; Australian Government, Final budget outcome, various years.

International education

The most significant question facing higher education in this Budget relates to the future of international education. International education is a significant component of most higher education providers’ usual operations, with international students making up 32.4% of all Australian higher education enrolments in 2019. Uncertainty has characterised the sector since restrictions were announced for travellers from mainland China on 1 February 2020, then for all foreign nationals (excluding Australian permanent residents) from 20 March 2020.

According to Budget Paper No. 1 (p. 36), international student arrivals will continue to be constrained by quarantine caps until the second half of 2022. Small numbers of international students are expected to start returning to Australia from late 2021, with gradual increases from 2022. However, previous plans to bring international students back to Australia have proven highly subject to change, with only one charter flight carrying 63 students having gone ahead so far.

This creates a significant funding challenge for the sector, with the latest available data from the Department of Education, Skills and Employment (DESE), showing revenue from international student fees accounted for approximately 27.3% of university revenue in 2019.

The Mitchell Institute (p. 3) has estimated that by the end of 2021, the sector will have lost $13.5 billion due to declining international student numbers, increasing to a total of $19.8 billion if Australia’s borders remain closed until the end of 2022. As the pandemic continues, students complete their studies and are not replaced by new arrivals or comparable numbers of online or offshore students. The latest data from DESE shows at March 2021, higher education enrolments by international students reached 316,441, 12.3% lower than in March 2020. Commencements reached 61,999 in March 2021 compared with 78,575 in March 2020—a decline of 21.1%, and 34.1% lower than at March 2019. (Due to travel restrictions, an enrolment does not confirm that the student is currently in Australia.)

Although some universities reported budget surpluses for 2020, this is against a backdrop of substantial spending cuts, including an estimated 17,000 job losses.

While funding uncertainty has the potential to affect all university operations, research has been regarded as particularly at risk. A substantial portion of general university revenue is directed towards research, where international student fees have been estimated to account for approximately 27% of spending.

However, despite the hopes of key stakeholders, including Universities Australia (UA), this Budget contains no new commitments to increased university research funding beyond the $1.0 billion provided in the October 2020 Budget, or any policy announcements to address the university budget uncertainty created by continued border closures.

Support package for international education providers

Budget Paper No. 1 (pp. 14–15) acknowledges international education is among the sectors worst hit by the pandemic, but confines its response in this Budget to English Language Intensive Course for Overseas Students (ELICOS) providers, as well as non-university higher education providers (NUHEP), which have, on average, a higher proportion of international students than universities. International students make up approximately 53.5% of enrolments at NUHEPs, versus 30.6% of students at universities.

The $53.6 million support package for international education providers, announced on 30 April and detailed in Budget Measures Budget Paper No. 2: 2021–22 (pp. 7–8) chiefly consists of continuing existing regulatory fee relief for providers, and student loan fee exemptions. For students, this includes a further extension of the FEE-HELP loan fee exemption for private higher education providers, although this is reliant on amendments to the Higher Education Support Act 2003.

The package also includes a commitment to $26.1 million for 5,000 short-course places through non-university providers, and $9.4 million for an Innovation Fund, which will allow providers to apply for grants of up to $150,000 to help them shift to offshore and online delivery.

The short-course funding is intended to encourage local students to take up places left vacant by declining international student numbers. It represents a continuation of the Government’s focus on higher education short courses as a key element of its COVID-19 response.

Short-course funding has also previously been provided for:

These short courses have consisted of newly created Undergraduate Certificates, as well as Graduate Certificates, which were part of the qualifications framework prior to the introduction of dedicated short-course funding. A certificate consists of four subjects, and usually takes around six months full-time study to complete. It can be used as a stand-alone qualification, or a pathway to further study.

Places are allocated to institutions through a competitive application process. The Government’s CourseSeeker website lists over 500 short courses currently available, predominantly (but not exclusively) at universities. It appears from analysis of the university funding agreements that funding from these earlier announcements has not yet been fully allocated.

Other measures

Industry PhDs

Budget Paper No. 2 (p. 8) also includes $1.1 million over two years from 2020–21 to introduce an additional weighting in the Research Training Program (RTP) funding formula for PhD students who undertake an industry placement in the first 18 months of their enrolment.

RTP funding is provided as a block grant to universities to provide tuition fee waivers, stipends for general living costs, and allowances for other research degree costs for both domestic and international research students. This additional funding is intended to provide an incentive for universities to facilitate industry placements for research students.

The Portfolio Budget Statements 2021–22: Budget Related Paper no. 1.4: Education, Skills and Employment Portfolio (pp. 14, 60) indicate the RTP is funded at approximately $1.1 billion per year over the forward estimates, and the additional weighting will be worth approximately $30,000 to the university per PhD graduate on completion.

Boosting the next generation of women in STEM

As part of the Women’s Economic Security Package (Budget Paper No. 2, pp. 81–82), $42.4 million has been allocated through the Industry, Science, Energy and Resources Portfolio, to establish the Boosting the Next Generation of Women in Science, Technology, Engineering and Mathematics (STEM) Program. The Program will provide 230 scholarships, co-funded with industry, for women to pursue higher education STEM qualifications.

This measure complements a range of other initiatives being delivered under the Advancing Women in STEM strategy. The STEM Equity Monitor shows women received approximately 38% of STEM degrees in 2019. However, it should be noted that this percentage is much higher in the natural and physical sciences (58%) and agriculture, environment and related studies (54%), compared with information technology (18%) and engineering and related technologies (17%), which poses a challenge for initiatives which target STEM in its entirety. 

Scholarships for health and aged care higher education courses

Higher education scholarships have also been funded in the Health Portfolio in response to both the Productivity Commission’s Inquiry into Mental Health and the National Suicide Prevention Adviser’s Final Advice, and the Royal Commission into Aged Care Quality and Safety. These measures, as outlined in the Health Portfolio 2021–22 Budget Stakeholder Pack (pp. 134 and 167)  are: 

  • up to 280 scholarships as part of a $27.8 million investment to increase the number of nurses, psychologists and allied health practitioners working in mental health settings and
  • as part of a $27.2 million investment to increase the number of nurses and allied health professionals working in aged care, additional places in the Aged Care Nursing Scholarship Program, with dedicated places for Aboriginal and Torres Strait Islander people.

Workforce support through the vocational education and training sector is discussed under skills training, elsewhere in this Budget Review. 

The policy agenda

In some respects, the lack of major higher education announcements in the Budget could have been welcomed as providing policy stability after the long-running funding policy deadlock was resolved in 2020 through the Job-ready Graduates Package.

However, in the context of COVID-19, the lack of action may represent a significant missed opportunity. According to Andrew Norton, Professor in the practice of higher education policy at the Australian National University, another temporary boost of research funding could have created a ‘smoother path to a smaller research system’ in the context of declining revenue from international student fees, and minimised premature termination of research projects. Norton also argues that ‘Tudge’s handout of $26 million worth of short courses for a domestic market many providers do not serve in courses they do not teach, is not going to keep them in business’.

With policy work currently underway on university research commercialisation and a new international education strategy, further announcements could be forthcoming by the end of 2021 to address these issues. However, in the meantime, emphasis seems to have been placed largely on short courses, which the Government has described as part of a pivot towards microcredentials.

In addition to short-course funding, the Government has invested in microcredentials through a ‘marketplace’ for online microcredentials announced in June 2020. The call for applications for the grant to build the marketplace was released in March 2021. The Government has also prioritised ‘embedding micro-credentials in the training system by funding a reasonable mix of short courses and full qualifications’.

Despite a lack of agreed definition, microcredentials are widely cited as a way to support rapid skills development, including by the OECD—they are often seen as cheaper, and more responsive to employers’ needs. New Zealand introduced short industry-aligned microcredentials to its regulated education and training system in 2018, while in Canada, Ontario has introduced a number of initiatives since 2019 to develop and implement microcredentials to help people ‘rapidly upskill and reskill for in-demand jobs’. However, some education researchers are less convinced. Leesa Wheelahan and Gavin Moodie have criticised the narrow instrumentalist focus of microcredentials, raising concerns about the possible impacts for students of removing skills development from broader contexts and frameworks of knowledge development in higher education.

Ultimately, the success of any investment in shorter form credentials in Australia will depend on what is funded, and how it is accredited. Investments so far have been short term, but may signal an intention to direct more higher education investment towards rapid upskilling and reskilling. Much may depend on the Government’s willingness to act on its acceptance of the recommendations of the Australian Qualifications Framework Review Final Report (2019, p. 12), which included revisions to the Australian Qualifications Framework (AQF) to define and recognise shorter form credentials such as microcredentials. The Australian Technology Network of Universities (ATN), in collaboration with The University of Newcastle, has welcomed short-course funding but pointed to the need for action on the AQF in its pre-budget submission (p. 3).

Concluding comments

This year’s higher education budget is notable largely for the absence of new expenditure. The Australian Academy of the Humanities has called this ‘a moment of missed opportunity for a nation built on ingenuity and education’, stating that the university sector has been ‘almost totally overlooked’ and ‘we cannot have a strong workforce and a strong economy without a strong university sector’.

Although the Government appears committed to higher education delivering job-ready graduates, including through short courses and innovative delivery, UA has also pointed out that this Budget confirms the cessation of funding for the Australian Awards for University Teaching and the Learning and Teaching Repository, which reward good university teaching and share better practice (DESE Portfolio Budget Statements 2021–22, p. 67). The ATN and the University of Newcastle have also expressed disappointment at the choice in this Budget not to build on existing short-course funding for universities.

However, larger structural uncertainties confronting universities and NUHEPs are likely to overshadow these issues. UA has stated that keeping Australia’s border closed until mid-2022 poses ‘serious challenges for the nation’s universities’ and called for governments to come together to develop a plan for the safe return of international students. It expects ‘the picture for universities will get worse. There will be significant flow-on effects for the nation’s research capacity and jobs inside and outside universities’. The Australian Academy of Science agrees with this view. While welcoming some science investments in the Budget, it expresses concern that it ‘contains no significant new funding for fundamental discovery science and no initiatives to stem the loss of university science jobs’.