A future with choice is better than a present facing a decline in public funding.
This is a crucial week for Australia. At stake is whether a viable higher education system can endure. Though much rhetoric focuses on the Whitlam promise of free higher education, the present system was established by the Hawke government from 1989. It abandoned a brief experiment with free places as inequitable. Instead, education minister John Dawkins established a dual funding stream for teaching students in universities part from government, part from students.
Course costs under the Dawkins system vary by discipline, but are fixed in quantum. Every university in the country receives the same dollar figure for training future nurses, teachers or doctors. The mix of public and private contributions varies by discipline.
In the 25 years of this system has operated, per student funding has fallen by about 14 per cent, either through direct cuts or government reduction of indexation, allowing inflation to undermine the real value of money invested.
As a result, it is widely acknowledged that the present level of funding per student is inadequate. The Bradley review and Lomax-Smith review agreed as much. As successive cuts to public funding of universities announced in 2012, 2013 and 2014 make clear, neither Labor nor the Coalition is able to fund the real costs of providing a quality university education given the huge expansion of student numbers.
Australia's public universities have kept afloat amid such financial difficulties by adopting a relentless growth strategy. First was the extraordinary expansion of international student numbers from the mid-90s to about 2009; then, just as the international enrolment surge started to falter, the introduction of a demand-driven system set off a wave of domestic expansion.
During the past two decades the sector has grown by about 200,000 students, the equivalent of four very large additional universities. The dollars per student may be inadequate but growth at the margins allows universities to squeeze more students into the classroom. This is not the way to education excellence but an inevitable result of federal funding policy.
Yet such growth will not continue. Neither international nor domestic student markets can produce sufficient demand to feed the continued growth the sector needs. After just two years of the demand-driven system, there is almost no unmet domestic student demand remaining. The international market depends unnervingly on factors beyond the sector's control, such as currency rates, immigration policy and international events.
So unless the policy settings change, universities can continue to grow only by taking market share from each other. This will not be good for institutions that sit lower in student preferences but play such a vital role in providing access, particularly in smaller communities.
Commentators have found much to fault in the higher education reform package. We are among those concerned about proposed higher interest rates for loan repayments and further cuts to funding for teaching, and have called for amendments to ameliorate these measures. Yet just rejecting the package, as urged by some senators, provides no solutions for a sector that cannot operate on present public funding and has fewer options to supplement income. Leaving the present settings in place is bad policy with worrying implications.
The sector needs the sort of fundamental funding reform being proposed to the Senate this week. At its heart lies deregulation of the student contribution.
This would release universities from their dilemma of chasing growth as the only answer to underfunding. It would allow different universities to strike different trade-offs between scale and price. It would end the uniformity of financial strategy in the sector.
In short, deregulation would open up space for universities to cater in their own ways to the needs of their specific student cohort. It would give universities options that don't exist under present policy settings.
It is no small achievement when an often divided and fractious sector unites around a major change. Through Universities Australia, the overwhelming majority of university leaders have expressed a consistent view on what they believe will be in the best interests of the sector.
Vice-chancellors accept the rigours of additional competition, and the requirement to provide significant funds to equity scholarships, because they know a future with choice is better than a present facing the long, slow decline of public funding.
We hope senators will choose wisely. For they must take responsibility not only for the consequences of policy change but, equally, for the consequences of failing to change. To defend the status quo in higher education would be a very big call.
John Dewar is vice-chancellor of La Trobe University. Glyn Davis is vice-chancellor of the University of Melbourne.