Will Higher Education be a GFC Casualty?

Professor Simon Marginson from the University of Melbourne predicts that Rudd Government promises on higher education will be a casualty of the budgetary deterioration from the global financial crisis (GFC), and the worsening budget deficit. Marginson points out how this involves a significant breaking of promises, and a failure to reverse the patterns of the Howard years.

He also points out how underfunding of Australian universities has driven behaviour, espeically

in relation to research and international student enrolments.

The real story is the education export industry and what drives it. This is a key weakness in policy, that began in the Hawke and Keating years, worsened under Howard and has now trapped the Rudd Government.

Since the late 1980s, when there were 25,000 international students, Australian education exports have grown by leaps and bounds. Last year there were 543,898 international students, half in higher education. They generated $15.5 billion in export earnings through tuition fees, accommodation, food, living expenses and entertainment. Education was our third largest export sector in dollar terms, behind only coal and iron ore.

Education earns more than wheat, beef, wool, gold, tourism and other staples. The growth of commodity exports has been slowed by the recession but education exports will grow in 2009 and look recession-proof, for the time being at least.

The Government does not want to do anything that would hurt education exports. Therein lies the problem.

What has driven the remarkable growth of education exports is not the fabulous quality of Australian education but its under-funding, the very under-funding that Kevin Rudd has promised to correct.

Australia was the only OECD country to reduce total public spending on higher education in 1995-2005, while student numbers grew by 30 per cent. Rudd used these facts repeatedly in the 2007 election campaign.

In universities, only about 70 per cent of the real costs of government-supported research projects are funded. Teaching is also funded below real cost levels. And the Government's subsidies for teaching are not fully indexed for cost increases.

Three things follow from this "structure of financial incentives", as the business management literature calls it. One, universities lose money on every local student and on most of their research. Two, each year the gap between funding and costs gets wider. Three, each year the universities need more non-government revenues to fill the gap.

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