May 26 2014

Professor Peter NoonanProfessorial Fellow, Mitchell Institute Victoria University

Honorary Fellow LH Martin InstituteGraduate School of EducationThe University of Melbourne

Global and National Trends: Policy Decisions and Impacts on Vocational and Higher EducationThe need for a new tertiary education financing framework

Current issues in tertiary education financing

• Three major unresolved policy challenges:– Divergent approaches and implementation of entitlement

concept– Growing gap in investment and enrolment growth between

VET and higher education– Growing gaps in entitlement models between states in VET

• Broader policy context– Reconceptualising tertiary education– Federalism reform process– Review of VET entitlement

Mitchell Institute Tertiary Funding Project

• Phase one report http://www.mitchellinstitute.org.au/reports/financing-tertiary-education-in-australia-the-reform-imperative-and-rethinking-student-entitlements

– Rationale – Principles – Key elements– Financing framework – Modeling scope and methodology– Next steps

• Phase two report– Modeling outcomes– Final design and implementation– Mid June release

Problems with current tertiary funding model

• Differential treatment of students;• Inconsistency in eligibility, subsidies and fees• Inconsistent access to income contingent loans• Inconsistent access to student income support• Widening investment gap between higher education

and VET;• Growing gap in per student funding levels;• Potential distortion of student choice; and• Diminished overall effectiveness of the tertiary

education system.

Expenditure on education and training in Australia, 2003-4 to 2012-13

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-1380

90

100

110

120

130

140

150

Higher Education VET School education (All government expenditure)

Inde

x (2

003-

04 =

100

)

ACIL Allen Consulting analysis based on Australian Bureau of Statistics data

Compound change in VET Expenditure, 2003-4 to 2012-13

VIC TAS WA C'wealth NT ACT SA NSW QLD

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

4.2%

3.5%

3.2%

1.6%

1.1%

0.4% 0.4%

0.0%

-0.2%

Com

poun

d Av

erag

e Gr

owth

Rat

e (C

AGR)

ACIL Allen Consulting analysis based on Australian Bureau of Statistics data

Projected participation rates (when enrolments kept constant at 2013 level)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 20250%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

15-17 18-24 25-29 30-5915-17 projected 18-24 projected 25-29 projected 30-59 projected

Participation rate (per cent)

The proposal • Coherent approach to tertiary education policy

– Tertiary education defined as Certificate III and above– Certificate I and II defined as pre-tertiary

• Commit to a coherent tertiary entitlement model through COAG

• Each level of government takes specific responsibility for a specific set of qualifications – Commonwealth degrees and sub degrees– States fund certificate III and IV

• Extend ICLs to all tertiary qualifications under a single scheme– Will require major rethinking of ICL design

Commonwealth and State funding responsibilities by AQF level

Key issues• Eligibility for entitlement– 18-24 year olds or working age population– Funding still available outside of the entitlement

• Design and relationship between subsidies and fees

• Extension of ICLs and settings– outcomes of modeling– financial sustainability essential

• Need for proper modeling of future demand requirements