Australian Financial Review Higher Education Conference 2011

Speech
  • Minister for Tertiary Education, Skills, Jobs and Workplace Relations

Sofitel
Sydney Wentworth
2pm, Tuesday 28 June 2011

Acknowledgements

I’m very pleased to take the opportunity to speak about the role of higher education in improving productivity.

It’s an opportunity to highlight the substantial structural changes that are underway in higher education as a result of the fundamental educational and economic reforms that flowed from the Government’s response to the Bradley Review of Higher Education, and how these will contribute to productivity outcomes for the nation.

There is no doubt that this is a time of generational change in the Australian higher education sector.

Higher learning is sometimes seen only through the prism of being a social good rather than something which is a key driver of economic productivity.

However, the reforms which are underway in Australia’s higher education system are setting us down the path of maximising the productivity of our workforce as the Australian economy increasingly demands that employees be highly skilled, creative and innovative in their outlook.

Over the next twenty years, we will increasingly depend on Australia’s universities and other higher education providers to ensure that we have the skills to support strong productivity growth in the industries of the future.

Education as a driver of economic productivity

By almost any economic measure Australia today is a resounding success story.

There’s one obvious reason that everyone talks about – and which is well known to anyone who comes from Western Australia – the continuing resources boom.

But there’s another, longer-term reason that isn’t as popularly acknowledged - we have kept ahead of the curve by modernising our workforce through the spread of skills and higher education to a far higher proportion of our population.

Twenty years ago, only one in eight Australians aged 25–34 held a qualification at the bachelor degree or above level. Today, that figure is around 35 per cent.

The reason is obvious. A university qualification is increasingly accepted to be the ticket to more highly paid, more secure employment.

That’s reflected in labour force participation rate for people with bachelor degrees of 87% – compared to 68% for those without a non-school qualification.

It’s also reflected by the 2.7% unemployment rate for bachelor graduates, which is much less than the unemployment rate of 8.0% for those without a non-school qualification.

Higher education has made and will continue to make modern Australia.

As the Bradley Review noted in 2008, ‘there is an international consensus that the reach, quality and performance of a nation’s higher education system will be key determinants of its economic and social progress’.

To turn our good fortune through the resources boom into long-term prosperity, we need to continue to increase the proportion of Australians with higher education qualifications.

The Australian economy is changing rapidly in both the level of demand for workers and the type of workers needed.

Treasury forecasts contained in the May Budget predict an additional 500,000 jobs will be created by 2013 as the economy once again hits full capacity. This is on top of the 750,000 jobs already created in the past three years. At the same time our unemployment rate is predicted to fall to 4.5 per cent.

That adds up to labour market pressure—especially at the top end.

A recent report by Skills Australia found that the most significant areas of future demand for people with qualifications will be at the diploma and degree level.

A great example is the mining sector. Contrary to the popular image of blokes in hi-visibility vests digging holes, many of the jobs in the resources sector are high skilled jobs, such as engineers, IT professionals, human resources managers, and financial officers, all of which require a uni degree.

This is the case across the economy as global demand for ever more sophisticated goods and services requires higher and higher levels of innovation and skills.

If the Australian economy is to continue to prosper we need to continue to improve workforce participation and productivity.

Indeed, this was the focus of the recent Budget.

A stimulating tertiary education environment allows for the creation of workers who are highly skilled and who can think expansively. It develops in citizens the knowledge and skills they need to contribute productively to the workforce.

There’s no question we need to plan for an unpredictable, fast-moving future.

We need to invest in our workforce of tomorrow and give all Australians the knowledge and skills and agility they need to participate as fully as they are able.

That means investing in education and skills right across the educational pipeline, from early learning, primary and secondary school education, through to post-secondary training and higher learning.

VET reforms

Before speaking about how our university reforms will drive improvements in national productivity, I want to touch briefly on the importance of a joined-up tertiary sector and what the Government is doing to ensure that our vocational education and training system delivers the skills that Australia needs.

In the recent Budget, the Government made a $3 billion investment to educate and train the skilled workers we need though our Building Australia’s Future Workforce package.

Like higher education, vocational education and training plays a key role in both the productivity and participation agendas.

In VET too we are committed to increasing the proportion of the population with higher level qualifications.

We are working with our counterparts in the states and territories and with industry to achieve our goals.

These joint aspirations are expressed in the COAG targets to:

  • halve the proportion of Australians aged 20-64 years without qualifications at the Certificate III level and higher; and
  • double the number of diploma and advanced diploma qualifications by 2020.

We’re already making progress. For example, students in publicly funded vocational education and training undertaking studies at Diploma level or above have increased by almost 21 per cent between 2007 and 2009.

We will continue our efforts to increase the amount of higher level training undertaken, including through initiatives announced in this year’s Budget such as working with states and territories to revise the $1.4 billion National Agreement for Skills and Workforce Development and introduce a reform-focussed National Partnership with funding of $1.75 billion over five years from 2012-13.

One of the roles of government is to ensure businesses have access to the resources they need to succeed—in particular the labour resources they need.

That’s why we’re investing some $550 million in a new National Workforce Development Fund. This fund will make it possible for government and industry to work together to deliver an estimated 130,000 high quality training places.

Importantly, it’s a demand-driven model that has the support of industry, as it will help us respond more effectively to the emerging skills needs of our economy.

Opening up our nation’s universities

So what we will see in the years ahead is a transformation of vocational education and training to ensure that we are supporting people to attain both higher qualifications, and the qualifications that Australian businesses need.

The transformation of higher education, through the Government’s historic decision to implement a demand driven funding system for undergraduate places from 1 January 2012, is also driven by future workforce needs.

Our objective is to increase the number of Australians who complete the university qualifications that will be of most benefit to them and to the broader economy.

Following the Bradley Review, two years ago the Government announced the target that by 2025, 40 per cent of all 25 to 34 year-olds should hold a qualification at bachelor's degree or above.

To help achieve this target, the Government is removing the cap on the number of undergraduate student places that can be offered so that universities can respond to student demand.

This is nothing less than a major deregulation of the Australian higher education system.

For decades, we have had a command-and-control system of central planning in which, every year, universities negotiated student places with Canberra. From next year, we are introducing a truly market-driven system in which Commonwealth funding follows the student.

Legislation is currently before the Parliament to give effect to this commitment.

But the changes that we announced in 2009 are already achieving results.

During the transitional years of 2010 and 2011, more Australian students than ever before have had the opportunity of a university education.

This year, in excess of 480,000 undergraduate places are being funded at public universities – an increase of 80,000 places since we came to Government in 2007.

And while 2025 remains more than a decade away, the early indications are that we are on track to reach that 40 per cent target.

Underpinning the government’s drive to increase the number of Australians attending university is a significant increase in funding.

While it went largely unremarked at the time, this year’s budget added a further $1.2 billion to fund additional student places, bringing to $3.97 million the total funding that the Government has committed over three successive budgets to support enrolments at public universities under the new demand-driven system.

Growth in participation is also underpinned by the new indexation arrangements which will deliver $3.15 billion over the five years to 2015, putting universities on a more sustainable funding base.

While the Government’s strong support for the higher education sector has been welcomed, I understand that people are looking with interest to the Base Funding Review which will report in October this year.

The Review has the important task of providing a stable and coherent framework for university funding over the medium to longer term.

Its fundamental task is to provide us with enduring principles for higher education funding.

It is important that the Review re-examines the current funding model from first principles to ensure that, in the new demand-driven system, universities do not receive perverse incentives to increase enrolments in disciplines where revenue exceeds the costs of delivery.

Expectations are high in the sector that this will deliver another funding bonanza.

In the tight fiscal environment in which we find ourselves, people naturally expect me to dampen expectations of the likely outcomes of this review – and naturally, I hate to disappoint. Any increase in base funding, if there is to be one, must be supported by solid evidence.

Given the importance of the Review in putting in place policy settings for the longer term, I expect that Government will wish to have a further conversation with the higher education sector once the Review has reported.

Quality

I turn now to issues of quality in higher education. Whilst increasing participation in higher education will have significant economic benefits, these will only be realised if quality is maintained and improved.

For these reasons, the Government has been consistent that anticipated growth in university enrolments must be accompanied by a focus on quality.

The establishment of the Tertiary Education Quality and Standards Agency is one, but only one, element of the Government’s quality agenda for higher education.

TEQSA will be an independent body with powers to regulate university and non-university higher education providers, monitor quality and set standards.

In many respects, TEQSA will be a world first. Policy-makers around the world are looking with interest to the leadership that Australia has displayed in sweeping aside a host of state-and-territory-based regulatory authorities and putting in place a single national regulator.

It’s a significant achievement and a very important one for a country which will compete within a strongly growing market for quality higher education within Asia in the decades to come.

But it would be wrong to think that the Government’s commitment to quality is encapsulated by the new regulator alone.

The government’s quality agenda also includes new performance funding arrangements to reward universities for delivering outcomes for students.

It also includes funding to support structural adjustment to allow universities to improve pathways from VET qualifications and to expand course offerings to better respond to what students and employers need.

To support the move to the new student demand driven system, the newMy Universitywebsite will improve transparency.

The recent publication of the Excellence in Research Australia scores has empowered universities to improve their research performance. Greater transparency with respect to universities’ performance on the teaching and learning side of the ledger is just as important, and will produce similar benefits for students, for universities themselves and for the nation.

Equity

Australia’s productivity will be enhanced if we can get the most out of the talents and abilities of all of our people.

We can’t achieve the increase in participation Australia needs unless we draw on the reserve of talented young Australians who currently don’t consider university as an option for them.

That’s why the government is also taking steps to ensure that the growth of university places benefits all Australians.

In this next generation of students, there will be many people who will be the first in their family to go to university because of this Government’s reforms.

The Government has committed $708 million over the next four years to improve the number of people from disadvantaged backgrounds accessing higher education through a range of school and university-based initiatives, to maximise their opportunity for personal advancement and to contribute to the economy.

Last month I visited the University of South Australia and met with students who were undertaking the bridging course that UniSA offers to make university education possible for talented people who did not have a chance to finish their secondary qualification.

It was great to see these enthusiastic young people grasping the opportunity of a university education with both hands. This is happening in universities across Australia – and it’s only possible as a result of the major new investment that we have made.

Applications data released earlier this month show that the numbers of low-SES students are estimated to be up by 12.7 per cent since 2009, compared with increases of 9.7 per cent for medium-SES applicants and 5.3 per cent for high-SES applicants.

Our reforms are having a real impact here. They’ve been supported by last year’s reforms to student income support which are particularly giving students from low income families the support they need to study. It’s vitally important that we continue to invest to attract more low-SES and disadvantaged students onto campuses around Australia.

Of course, true equity that encompasses every Australian and every Australian community can’t be achieved without an effort to improve regional universities.

And to do this we have allocated $500 million over five years for a Regional Priorities Round of the Education Investment Fund, and regional loading totalling $249 million, which will strengthen regional higher education by helping to overcome the higher costs of regional campuses, compared to campuses in major cities.

This reflects the Government’s commitment to ensure that regional areas both contribute to and share in the benefits of a strong economy.

A more flexible and responsive system

As I mentioned earlier, it’s important that our higher education system is responsive to both what students want and what employers need.

If we’re really going to make our significant investments in higher education work, we have to ensure our universities are able to respond with greater flexibility to the needs of students and the economy.

As the Business Council of Australia cautioned earlier this year, it will be important that the allocation of student places responds to the needs of all stakeholders, including industry and business, as well as students.

To this end, there is scope for industry and institutions to work together to provide students with information and develop industry-based strategies to help ensure the sector is producing the graduates our economy demands.

Such partnerships are already occurring. I was pleased to launch earlier this year a new collaboration between the Innovative Research Universities and the Australian Chamber of Commerce and Industry to give university students better access to Work Integrated Learning opportunities.

While such partnerships are not a new thing, they are likely to become increasingly important in the future.

The new demand-driven system, which comes into force next year, will be one of the most profound reforms to our university system in many years.

Making it work successfully is going to require good judgement and commonsense from our university leaders to ensure quality is not compromised by a rush to higher enrolments in lower quality, higher-return courses.

We want to let the market to do its job, but we will exercise our reserve powers if changes are either destabilising or do not serve the national interest.

However, we’re confident that universities will respond in a positive way to meet the needs of broader Australian community.

Conclusion

The economic challenge we face is to drive productivity and participation to meet the needs of our strengthening economy.

While other developed nations struggle under the weight of increasing unemployment, we have achieved record jobs growth.

We have invested so that Australians get the education and skills they need to share in our nation’s prosperity.

We have made significant investments and reforms to the way that higher education and vocational education and training is delivered in Australia.

We are transforming the tertiary landscape to ensure that more Australians are able to reach their full potential – including those who, for too long, have been locked out.

This Government sees getting a university degree or vocational qualifications as a potentially life changing opportunity and one which improves the nation’s capacity to generate wealth.

It’s about providing more Australians with the education and skills they need to get a new start, a better job, a higher pay packet.

It’s about giving Australians the chance to reach their full potential and share in the nation’s prosperity.

We’re reforming our vocational education and training system to make it easier for more Australians to get the skills they need.

Investing in the Australian people—making the most of our human capital—is critical to our economic reform agenda.

Our commitment is to the continued expansion of a high quality university sector, to educate the graduates needed by an economy based on knowledge, skills and innovation.

That’s what we need to achieve a productive and prosperous economy.

That’s what we need to compete internationally as we move further into the 21st century.

Thank you again for the opportunity to speak today and I wish you well for the rest of the conference.

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