House debates

Wednesday, 12 September 2007

Higher Education Endowment Fund Bill 2007; Higher Education Endowment Fund (Consequential Amendments) Bill 2007

Second Reading

Debate resumed from 16 August, on motion by Ms Julie Bishop:

That this bill be now read a second time.

upon which Mr Stephen Smith moved by way of amendment:

That all words after “That” be omitted with a view to substituting the following words:“whilst not declining to give the bill a second reading the House:

welcomes the fact that the Higher Education Endowment Fund, like the Future Fund, is for investment in Australia’s long-term national interests;

9:08 am

Photo of Kirsten LivermoreKirsten Livermore (Capricornia, Australian Labor Party, Shadow Parliamentary Secretary for Education) Share this | | Hansard source

I am pleased to have this opportunity to contribute to the debate on the Higher Education Endowment Fund Bill 2007 and the Higher Education Endowment Fund (Consequential Amendments) Bill 2007. There is no doubt that initiatives to secure the long-term viability of our education system are long overdue. This government has neglected education year after year and budget after budget. It is the Labor Party that brought education to the forefront of the political debate by emphasising education’s fundamental importance to Australia’s future economic security—and of course we have done that throughout this year with the advocacy of our education revolution. Thus, this initiative has only come about as a result of the ALP’s education revolution policy and leadership forcing the government to act.

The Higher Education Endowment Fund Bill gives effect to the centrepiece of the government’s 2007-08 budget promise to create a permanent fund for the provision of capital works and research facilities to higher education institutions. The Higher Education Endowment Fund (Consequential Amendments) Bill provides for the implementation of the HEEF within the framework of the Future Fund Act 2006 and the Income Tax Assessment Act 1997. There are a couple of other changes to the management of the Higher Education Endowment Fund and the Future Fund, which I will return to later.

The ALP support these bills because we are dedicated to improving Australia’s education system and because we have long argued in this place for increased expenditure on higher education. The benefits of a perpetual fund with adequate assets to provide an estimated $308 million for needy projects each year must be supported. At first glance, these bills provide a strong commitment by the government to higher education funding; however, when considered in the context of 11 long years of Howard government cuts, this initiative is too little too late. The provision of a $6 billion fund will not adequately make up for the significant cuts to higher education funding during the Howard government years. In fact, one Howard government minister even confided in the Sydney Morning Herald on 12 May this year, prior to the budget, that if Rudd and Labor won the election: ‘My one consolation is that he would at least salvage the universities.’ Professor Richard Larkins, the Chair-elect of Universities Australia, said on behalf of Universities Australia and the Group of Eight universities that the sector was very grateful for the initiative. Professor Larkins said this to the Senate Standing Committee on Employment, Workplace Relations and Education during its discussion on the proposed funds. The words ‘very grateful’ indicate the extent to which years of neglect have brought our higher education institutions to their knees and what a shameful record this government has.

Australian universities have suffered a cumulative cut of six per cent in the years 1997 to 2000, which was valued by the Group of Eight as having cost the industry $850 million in funding shortfalls over that period. Obviously, this public expenditure hole has had serious long-term consequences for the sector. In fact, the Department of Education, Science and Training made a submission to the report of the Productivity Commission on science and innovation in 2006 that the backlog of deferred maintenance expenditure had reached an estimated $1.5 billion for the university sector—and this is the sector that we need to be driving innovation to keep us competitive and prosperous into the future. The Group of Eight extended that cost in their submission to the Senate inquiry into this bill, valuing their members’ maintenance liabilities alone at $1.53 billion. This fund will provide future assistance, but the shortfalls of the last 11 years will take some years to correct and we can never truly make up for lost opportunities during that period. The emergence of the Higher Education Endowment Fund does nothing to allay fears that the Howard government are determined to destroy our proud tradition of publicly funded universities. The spending on capital works and research facilities was proposed only after terrible polling results for the government and Labor’s constructive approach to educating our nation. So it is not a genuine commitment to the higher education sector; it is the usual Howard government response to bad polls, which seem to be the only things that motivate them these days.

In the past few years the government has repeatedly told us that working families in Australia have never been better off, yet higher education and training are becoming more and more difficult for the average Australia family to afford. That is not an idle statement. In August this year, the Centre for the Study of Higher Education at the University of Melbourne released a report into Australian university student finances in 2006. The report was commissioned by the Australian Vice-Chancellors Committee, which is now Universities Australia. It found that 71 per cent of full-time undergraduate students work an average of 14.8 hours per week throughout the semester and 40 per cent of those students believe that paid work adversely impacts on their studies. Students are not working those kinds of hours because they want to but because they have no choice, even when they know that it is impacting on their results and on their future opportunities. The report also showed that one in eight tertiary students regularly go without food or other necessities and, for Indigenous students, this figure rises to one in four.

On the basis of those hardships faced by students and documented in this report, it is no wonder that they are turning away from higher education. In 1997 the proportion of the year 12 cohort that enrolled in higher education was 40 per cent. By 2004, the throughput from schools was down to 32 per cent. This is in an age of acknowledged skills shortages. It is time to increase the participation of young people in education. When you look at the ratio of students to staff, you see that that ratio has risen considerably over the last 11 years, in tandem with the cost of HECS increasing by an average of 100 per cent over the last 10 years. So it does seem as though students are getting far less value for their money. There are HECS increases and the optional fee top-ups on the HECS rate—and of course we know that there is nothing optional about those fee top-ups. Just about every university in Australia has taken the opportunity given to them by the government to increase HECS fees; of course, they have had no other choice because of the government’s underfunding of the sector. So students are getting slugged with those fee top-ups on their HECS rates. Student poverty is becoming the norm and there is an enormous disincentive for young people and potential mature age students to take up higher education.

The percentage of public investment in higher education has fallen. It is now so low in Australia that, amongst the OECD countries, only the United States, Japan and South Korea contribute less. Meanwhile, many of our international competitors have been increasing their commitment to providing world-class higher education institutions. Surely that is sending a message to the government about where their priorities should be when they are looking out for the future of this country.

It is a terrible indictment of the Howard government that, in this era of so-called economic prosperity, so little has been committed to improving education infrastructure, including broadband. The Labor Party and the higher education sector have been raising this with government for 10 years. Glyn Davis, the Vice-Chancellor of the University of Melbourne, summed up the feeling after this year’s budget announcement. He said:

I was genuinely shocked. One of the reasons I was so pleasantly surprised is higher education has not featured in national policy for some time.

What an extraordinary situation that is, when we see the kind of spending and commitment that competing nations have shown towards higher education. It is plain that over the last 11 years this government has not been investing in higher education. It is not investing in our people and it is not investing in our future.

Going to the technical side of how this endowment fund is to operate, the Treasurer has assured us that it will not replace existing Commonwealth schemes which directly and indirectly support capital and research investment. It is absolutely incumbent upon us in the Labor Party to hold the government to this commitment. Any future Labor government will ensure that this remains the case. We do not want this endowment fund to be the cover for simply taking more money from other sources out of the higher education sector.

The Minister for Education, Science and Training, in her second reading speech, said that the endowment fund investment is in addition to existing programs. However, in media comments following the budget, the minister stated that she would like to see the funding streamlined and that the endowment fund would have much broader guidelines and much greater flexibility than existing mechanisms, such as the Capital Development Pool. When we hear the minister using the word ‘streamlined’ it raises alarm bells for us. We believe that questions remain about the relationship between the endowment fund and other sources of funding for universities. So we will be watching all of that very carefully to make sure that this is not cover for taking money away from universities in some other form.

The Higher Education Endowment Fund (Consequential Amendments) Bill 2007 allows for the implementation of the Higher Education Endowment Fund through the amendment of the existing Future Fund Act 2006. Proposed section 49 of this bill provides that in the event of a poor year where the fund returns little or no income the fund will release no money. The Department of Education, Science and Training reiterated in their submission to the Senate inquiry into these bills that this will be the case. Their submissions states:

... only accumulated returns are made available each year for payment to higher education institutions.

The returns available for distribution to the sector will be linked to the performance of the HEEF—

that is, the endowment fund—

and in turn the market ... in the short-term there may be some volatility.

Therefore, it is vital that multiple avenues for capital works and research infrastructure funding remain available to universities, as the projected income from the endowment fund is reliant on strong market returns. Thus it will be difficult for tertiary institutions to depend on this pool alone for infrastructure development. That is especially the case given the shortfall over the last 11 years. We really are coming from behind when it comes to the maintenance and development of infrastructure at universities.

The Future Fund Board of Guardians will have statutory responsibility for the management of the investments of the endowment fund, and the Treasurer and the Minister for Finance and Administration will be the responsible ministers. These ministers will also determine the maximum amount payable from the endowment fund. The minister for education, however, will have control over how the money is spent due to the different purpose of the endowment fund in comparison with the objectives of the Future Fund.

A number of groups raised concerns in their submissions to the Senate inquiry into these bills about the lack of direction on how the funding is to be distributed. Proposed sections 42 and 43 allow the minister to appoint the advisory board and proposed section 45 gives the minister the power to authorise grants. It is crucial that the composition of the advisory board is based on merit and expertise, and it would be better if its functions and responsibilities were incorporated into the body of this bill.

In contrast to the situation with the amendments in this bill regarding the Future Fund itself, the minister will control where the returns on the endowment fund are allocated. It is this aspect of the bill which the Group of Eight has warned could see strategic consideration of the sector’s infrastructure needs traded for political point scoring. I guess there is good reason for the Group of Eight to have those kinds of concerns, given the government’s track record in other programs. Just a couple of examples that come to mind are things to do with roads and the Regional Partnerships program, where the government allowed good programs to degenerate into pork-barrelling exercises. We need to make sure that the returns from this endowment fund are wisely spent for good, strategic reasons. The Federation of Australian Scientific and Technological Societies went a step further, labelling the system for grants ‘a significant slush fund for ministerial pork-barrelling’. It is crucial to the success of our universities that political considerations remain outside the allocation of these funds.

Turning briefly to my own electorate, I note that there are some concerns about regional and smaller campuses being able to gain any of the funds allocated by the advisory board. It would be difficult for universities such as Central Queensland University to compete with the Group of Eight for funds. For example, Ian Chubb, the Vice-Chancellor of the Australian National University, has indicated that the elite universities will lobby to ensure that the returns on the endowment fund are not smeared across the sector. I will be making sure that Central Queensland University, which is an important regional university and a very important contributor to our local community, will be getting its fair share—not just for the sake of it but to meet the aims of the university and to develop projects that are important for the university and for the future development of our region.

Moving away from the endowment fund itself, proposed sections 18(a) and 8(1)(a) amend the Future Fund Act to legislate that the responsible ministers cannot direct the Future Fund Board of Guardians to invest in a particular asset. This is intended, according to the Minister for Finance and Administration, to:

... stop the Labor Party robbing future generations by raiding the Future Fund, taking its annual earnings and dictating to the board that it should invest its money in advancing Labor’s political interests.

This brand of negative politics is merely scaremongering. Labor has been committed to the objectives of the Future Fund and has assured the public that it will meet public sector superannuation liabilities as well as provide an investment for the future through its national broadband network.

I would like to record my support for the amendment moved by my colleague the shadow minister for education and training condemning the lack of investment in higher education and the shocking range of consequences this starvation of funds has brought upon students, staff and facilities at our institutions. It is also important to note that the Labor Party holds grave concerns about the lack of transparency in the allocation of funds, which I have outlined previously.

In addition, it is clear that the Labor plan for a national broadband network is far superior to the 18 piecemeal broadband proposals we have had from the Howard government over the last 11 years. It is an important piece of infrastructure for the future success of our higher education sector. The government has been caught out trying to provide a marginal electorate targeted upgrade, which has embroiled the government in legal action.

It is clear that the Australian higher education sector and institutions need this money desperately, following more than a decade of miserly government contributions to the skilling of this nation. Our universities have suffered under this government, through underfunding and neglect. Universities are paying the price for that neglect; so are researchers and students, as they pay higher and higher costs for their degrees. Ultimately, it is Australia that loses out. Without a skilled population and the innovation that universities foster, our country cannot keep up with the rest of the world. Labor recognise this and we are committed to putting education at the centre of our vision for a fair and prosperous Australia.

9:25 am

Photo of Stuart HenryStuart Henry (Hasluck, Liberal Party) Share this | | Hansard source

I am delighted to rise in the House today to speak in support of this extremely important and visionary legislation for the higher education sector in Australia. By introducing the Higher Education Endowment Fund Bill 2007 and the Higher Education Endowment Fund (Consequential Amendments) Bill 2007, the Howard government is seeking to secure and guarantee a higher level of funding for the higher education university sector well into the future, for the benefit of all Australians seeking to develop their knowledge and effectively compete in an increasingly global labour market.

I would like to review exactly what the Howard government has achieved and has done for this sector since 2004—which somewhat contradicts much of what the previous speaker, the member for Capricornia, has had to say. We have implemented the Our Universities: Backing Australia’s Future reforms, through which the sector will be $11 billion better off over the next decade. We have passed voluntary student unionism legislation, which puts $160 million back into the pockets of students and, further, provides $90 million through the VSU transition fund to support recreational and sporting infrastructure and small businesses on regional campuses. We have provided for 50,000 new places in the higher education sector by 2011 as a result of the Backing Australia’s Future reforms and other initiatives. These places are targeted at areas of skills shortage. They include 605 medical places, 1,036 nursing places, 431 mental health nursing places and 210 clinical psychology places as part of the Council of Australian Governments action plan on mental health and Australia’s health workforce.

We have provided funding for 500 additional engineering places to commence in 2008. These places are part of Skills for the Future. We have provided funding for a new school of dentistry and oral health at Charles Sturt University, allocating 240 new places over five years for the school, along with an up-front capital investment of $58.5 million. We have provided $65.9 million in capital funding for Australian universities for new and continuing campus developments, particularly in regional centres and suburban growth corridors. This includes $12 million in capital funding for a global centre of excellence in transnational crime prevention at the University of Wollongong and capital funding for medical schools and other capital works at Deakin University, $18 million; Monash University, $5 million; the University of Western Sydney, $25 million; and Bond University, $4.5 million. We have provided $125 million for capital funding for the Australian National University, a world leader in medical research, and $8 million for a National Centre of Excellence for Islamic Studies, to be hosted by the University of Melbourne, Griffith University and the University of Western Sydney. We have provided $1.9 billion under Realising our Potential, with funding for higher education and what has now become the $6 billion perpetual Higher Education Endowment Fund, which we are here to speak on today.

There is absolutely no doubt that the establishment of the Higher Education Endowment Fund represents an unprecedented and far-sighted investment by the Howard government in the university sector. The fund further supports a significant commitment by the Howard government for infrastructure for the university sector, including, over the past 11 years, approximately $607 million through the Capital Development Pool and some $1.5 billion for research infrastructure block grants. In addition, we have invested over $459 million in universities through the Major National Research Facilities Program. Further, up to 2010, some $240 million will be spent on the National Collaborative Research Infrastructure Strategy. The endowment fund is in addition to any of these existing programs.

The Higher Education Endowment Fund Bill proposes two separate processes which are required to bring the fund on stream. The first relates to the investment of $6 billion, already increased by the Howard government from budget surpluses from the initial $5 billion in capital to establish the Higher Education Endowment Fund. The second relates to making grants for financial assistance to build state-of-the-art facilities for research and learning.

The Higher Education Endowment Fund (Consequential Amendments) Bill 2007 amends the Future Fund Act 2006 and the Income Tax Assessment Act 1997 to support the introduction of the Higher Education Endowment Fund. These amendments to the Future Fund Act make it clear that the Future Fund Board of Guardians has two specific responsibilities: one is to take on the investment management role for the Higher Education Endowment Fund; the other is that each fund will have a separate investment mandate. The Minister for Finance and Administration will continue to be responsible for the administration of the Future Fund legislation plus the expanded functions of the Future Fund board for the investment of the Higher Education Endowment Fund. These amendments will ensure that investments made by the Future Fund Board of Guardians are determined by the board, not by ministerial direction, with the broad guidelines of the investment mandate. Both this bill and the Higher Education Endowment Fund Bill specify that the responsible ministers cannot direct the Future Fund board to use the assets of the fund to invest in a particular financial asset—for example, in shares in a particular company. It also prevents the responsible ministers from issuing a ministerial direction that has the effect of requiring the board to use the assets of the fund to support a particular business entity, a particular activity or a particular business. Put simply: the Higher Education Endowment Fund is being established to enhance the funds that are available to be invested for the benefit of the university sector.

The Minister for Finance and Administration and the Treasurer will carry the responsibility for the management of the endowment fund capital through the Future Fund board of directors and the Future Fund management agency. The key points are: the board of guardians will be guided in its activities by an investment mandate established by the Treasurer and the minister for finance; and the Higher Education Endowment Fund investment mandate will set out the level of returns expected by the responsible ministers. The endowment fund bill provides an initial amount of $5 billion—that is, it was initially $5 billion—to be credited to the endowment fund, but that has now been increased by a further $1 billion, as announced by the Treasurer on 21 August. Following that announcement, Universities Australia were moved to issue a media release entitled ‘Additional $1 billion will boost benefits from HEEF’. That was a ringing endorsement from Universities Australia.

It is expected that the first round of funding to higher education institutions from the endowment fund will become available in the second half of 2008. The endowment fund will be a true endowment fund, with a requirement in the legislation to maintain the real value of the fund. In addition, the legislation requires that only accumulated returns are made available each year for payment to higher education institutions. The amount that can be made available to higher education institutions each year will be determined by the board of guardians in accordance with the endowment fund investment mandate. The Future Fund is yet another example of the Howard government’s strong economic management and of using the benefits arising from the strong economic management of the Howard government to bank billions of dollars for the future needs of Australians. It is worth noting the support for this initiative from the tertiary education sector. Professor Gerard Sutton, of the Australian Vice-Chancellors Committee, described it as:

... an important step towards ... ensuring Australia is internationally competitive, domestically strong and innovative.

The Vice-Chancellor of the University of Melbourne, Professor Glyn Davis, said the package was very welcome. He said:

It represents not only a new investment in Australia’s public universities but a new philosophy about their regulation.

He also described the package as ‘pretty astonishing’.

I support the minister’s comments that universities need to seriously consider ways of attracting more donations from graduates, corporates and individuals, as Australia is lagging well behind other nations, such as the United States, in philanthropic support. She is right when she says these reforms will allow more world-class universities to emerge in Australia, and we need this to happen. Let us look at the Shanghai Jiao Tong University ranking system, regarded as the most credible of all such ranking systems in the world. It ranks just two Australian universities in its top 100. They are the Australian National University, at 57th, and the University of Melbourne, at 79th. We need more Australian universities to aspire to and to achieve these rankings. The Higher Education Endowment Fund Bill seeks to provide certainty to Australia’s university sector, which is so important to keeping the country at the top of international competitiveness in so many important areas of our economy. Labor’s planned smash-and-grab raid on the Future Fund smacks of the same economic blundering it pursued when last in government, which left this country with a $96 billion debt. It has been the strong economic management of the Howard government that has wiped out that debt, allowing us to take the necessary measures to guarantee economic security into the future.

I would like to address some of the criticisms that have been falsely laid against this legislation. Firstly, how will this affect other higher education funding programs, such as the Capital Development Pool and the National Collaborative Research Infrastructure Strategy? As I mentioned previously, the Higher Education Endowment Fund is in addition to existing programs. Both the Capital Development Pool and the National Collaborative Research Infrastructure Strategy will continue in line with this policy. Will there be enough money available for distribution from the endowment fund each year? The government estimate that about $300 million will be available each year, and it is our intention to treat this fund as a real endowment fund. The capital value will be maintained over time and payments from the endowment fund will only be made from earnings. Naturally, due to the variable nature of the markets and the consequential effects on investments, this may result in funding distributed to the sector varying from year to year. Indeed, I note comments from the Australian Vice-Chancellors Committee President, Professor Gerard Sutton, as reported in an article published on Wednesday, 9 May titled ‘Capital idea gives a warm inner glow’. His view was much less conservative on the potential value of the fund:

... the $5 billion Higher Education Endowment Fund was more than the sector had expected. “You’re talking to a smiling vice-chancellor,” Professor Sutton said.

“This is spectacular for the university sector, there’s no doubt about it.

“In the three areas the AVCC were asking for support, the student assistance we got; the dollars per student in many of the bands increased and in the case of the capital works and research facilities, they more than met what we were asking for with the endowment fund.

“That’s there forever and if they got a 10 per cent return that’s half a billion dollars a year coming into the sector.”

A further article, in the Australian of Wednesday, 22 August, titled ‘Boost for endowment fund’, stated:

The university sector would reap an extra $60 million a year in dividends after the federal Government yesterday added $1 billion to the $5 billion endowment fund it announced in the May budget.

Professor Sutton indicated that, by calculating what returns the universities made from their own investments, the extra $1 billion would return about $100 million, bringing the total return to $600 million. He said:

I think they’ve deliberately budgeted conservatively and I think that’s a responsible thing to do.

The government will not be prescriptive about requiring matching funds. The advisory board will take into consideration whether universities have been able to raise co-funding—for example, from state or territory governments, industry, alumni or members of the public, when providing advice on the best strategic proposals. As for the question of how the endowment fund will manage funding over multiple years, the perpetual nature of the fund encourages longer term, strategic projects, and multiyear projects will be possible, as they are now, for example under the Capital Development Pool.

I now turn to the issue of philanthropic support for Australian universities, which unfortunately does not have a strong tradition at this time. Unlike the United States and, to a lesser extent, the United Kingdom, Australia lags badly in this area. In 2005, only 1.1 per cent of Australian university revenue came from donations and bequests. It was interesting to see an article in the Australian on 10 May headed ‘Funding to spark an outbreak of giving’. It stated:

The new higher education endowment fund is likely to encourage corporate donations to universities, as long as it is properly managed, according to a leading philanthropist.

The article also quoted Pratt Foundation chief executive Sam Lipski as saying:

If the government is creating this lead, it may well set off some interest in the corporate sector.

He warned, though, that it would be a mistake for universities to believe it would be a substitute for their own fundraising activities. Private funding for higher education in the USA is much higher than anywhere else in the world, with many American universities having established considerable endowment funds during the last 20 years.

In reinforcing the importance and value of endowment funds for the higher education university sector, I would like to refer to a very good article by Steven Schwartz, Vice-Chancellor of Macquarie University, published in the Australian Financial Review on 2 July and titled ‘HEEF must heed lesson of Harvard’. The article stated:

Endowment income makes it possible for a university to provide a margin of excellence without having to raise tuition fees or pile more students into classes. A strong endowment protects a university from fluctuations in government funding, while also providing a buffer against any downturns in international student fees.

Endowments are created from initial capital and from gifts of cash, securities and property from individuals, corporations and foundations.

The largest university endowments belong to private American universities. The legendary Harvard University endowment of $US30 billion ($36billion) leads the pack followed by Yale, which has about $US20 billion in its endowment. About 30 per cent of Harvard’s budget comes from endowment earnings.

In addition to Harvard University—and its closest competitor, Yale—Stanford, Texas and Princeton university endowment funds are valued at more than $US10 billion. While the USA does not have a centralised federal government run higher education endowment fund, 24 American states have created government matching fund programs. The average American university in 2003 had an endowment 14 times that of a comparable British university. The only British universities that compare with the best endowed American universities are Oxford and Cambridge. (Quorum formed) Interestingly, the British Labour government is implementing a policy right now to increase philanthropic support to English universities.

Under the Howard government, funding to universities has increased by 26 per cent in real terms since 1996. Let us look at the university populations in Australia over the past 10 years. The total number of students studying in Australian universities has grown significantly, from 604,176 students in 1995 to just under one million—957,176—students in 2005, an increase of 353,000 students, or 58 per cent.

The number of Australian students at universities has risen from 557,989 students in 1995 to 717,681 students in 2005, an increase of 29 per cent. The number of Commonwealth supported places—HECS places—has risen from 403,290 equivalent full-time student load in 1995 to 424,287 in 2007—up by 20,997. Postgraduate student numbers—coursework and research—have significantly increased, from 124,125 students in 1995 to 263,504 students in 2004, an increase of 139,379 students or a massive 112 per cent.

There is no doubt that the Howard government has a vision for the future and has been implementing that vision for the future as far as the university sector is concerned, as these figures quite clearly indicate. This is also clearly demonstrated by ensuring that Australians have the opportunity to have a higher education sector that is second to none, supported by this visionary legislation. I commend the bills to the House.

9:46 am

Photo of Kim WilkieKim Wilkie (Swan, Australian Labor Party) Share this | | Hansard source

I rise to speak on the Higher Education Endowment Fund Bill 2007 and the Higher Education Endowment Fund (Consequential Amendments) Bill 2007. These bills give effect to the government’s announcement in the 2007 budget to establish a perpetual endowment fund. The government announced in the budget that the intent of the fund is to generate earnings for capital expenditure and research facilities in higher education institutions. The Higher Education Endowment Fund (Consequential Amendments) Bill 2007 amends the Future Fund Act 2006 and the Income Tax Assessment Act 1997 to support the implementation of the Higher Education Endowment Fund. The consequential amendments bill also provides that investments made by the Future Fund Board of Guardians will be determined by that board and not by ministerial direction. The two bills are linked and so I shall be dealing with them together.

Labor fully supports these bills. Any measure that seeks to repeal some of the damage that this tired and out-of-touch government has levelled upon the quality of education in this country will always meet with approval from this side of the parliament. Before I proceed, it is important that we recognise why we are all here today debating the future of education funding, 11 years into the Howard government’s tenure and only weeks from a looming federal election. It is true that this government is suffering from a highly advanced state of election jitters catch-up. The only reason that we are debating this issue here today is the sullen fact that the Howard government has for 11 long years neglected education in this country, since coming to power. Nowhere is this neglect more evident than within our premier learning institutions, our universities. In their desperate bid to retain power at any cost this government is venturing into all sorts of brave new worlds, from acknowledging the existence of climate change to the ‘novel’ idea of adequately funding our education sector.

In the lead-up to the federal election, this government has become as predicable as a tennis match involving Roger Federer. The sad truth is that the neglect shown by the Howard government over the past 11 years has been nothing short of a total disgrace. Indeed, one only needs to glance over some of the findings from the recent Australia Fair report 2007 to get an idea of the degree of underinvestment that this government has made in education since coming to power. The report found that, of the English-speaking OECD countries and with the exception of Ireland, Australia spends the least on education, as a proportion of GDP. The report found that, out of the English-speaking OECD countries, only the UK has lower rates than Australia of people aged 25 to 34 and 45 to 54 with an upper secondary education. Also, literacy rates among Australian adults are below those of much of northern and western Europe, with one in six Australians lacking functional literacy skills.

Only 1.5 per cent of public investment in education in Australia goes to pre-primary education, compared to the OECD average of 7.2 per cent, with only Ireland investing less. Australia’s average rate of preschool enrolment falls in the bottom half of all of the OECD countries. Furthermore, as the most recent figures published by the OECD show, Australia ashamedly has the fourth lowest proportion of public expenditure on primary, secondary and postsecondary non-tertiary education, at 83.7 per cent, down from 85.5 per cent in 1995 and well below the OECD average. Australia has the fourth highest proportion of private expenditure on primary, secondary and postsecondary non-tertiary education, at 16.3 per cent, up from 14.5 per cent in 1995 and more than double the OECD average.

It has been our universities that have suffered the most under this government’s neglect. Over the past 11 years, this government has grossly underfunded the university sector, which is so vital to Australia’s future. In contrast, the great majority of OECD countries, and a great many non-OECD countries as well, recognise that the economy of tomorrow requires much greater investment in universities, while this tired and out-of-touch government has slashed it. It took little time to get to task. In its first budget, in 1996, the Howard government saw fit to cut university operating grants by a cumulative six per cent over the forward estimates from 1997 to 2000. This resulted in a total of $850 million in cuts to the sector.

Overall, Australia has the fourth lowest proportion in the OECD of public expenditure on tertiary education, at 48 per cent. That is down from 64.8 per cent in 1995 and well below the current OECD average of 76.4 per cent. In all of the OECD, only the United States, Japan and South Korea make less significant investments in tertiary education, in proportional terms, than Australia.

As an article published in the Australian on 6 September reported, since the late 1990s Commonwealth funding for private schools has outstripped funding for universities. Let me repeat that: this article stated that Commonwealth funding for private schools has outstripped funding for our universities. Yet, in the light of these facts and figures, this arrogant government has had the audacity to claim that it has increased tertiary spending by 25 per cent since 1996. Yes, it is true that the amount of money spent on tertiary education has risen under the Howard government, but it has not done so in real terms. In fact, under the Howard government, the amount of Commonwealth funding per student in real terms has plunged by nearly $1,500. And, as public investment has progressively fallen, universities have had little choice but to increase their reliance on HECS and other fee increases.

While student HECS contributions have increased by nearly $2,000, fees and charges have risen by over $3,000. So, like some university students in the United States and the United Kingdom, many Australian students can now look forward to the prospect of a crippling burden of debt upon graduating. I was pleased to read in some articles printed this week that the Leader of the Opposition is looking to address those sorts of issues if he is elected Prime Minister. In fact, since 1996-97, the debt burden for Australian university students has nearly tripled, from $4.5 billion to nearly $13 billion in 2005-06.

While all of these figures may look bad on paper, their actual effects on the front line of university teaching have been disastrous and have compromised greatly the level of teaching quality that our students receive. One of the most poignant examples of how this government’s failure to invest in our universities compromises the level of teaching effectiveness is the deterioration of staff-to-student ratios. As Universities Australia has shown, in 1995 there were approximately 14.6 students at Australian universities for every member of staff. Today that figure stands at approximately 20.4 students for every member of staff. In fact, I have it on good advice that, down the road at the ANU, finding a political science, history or international relations tutorial with fewer than 20 students is becoming increasingly rare. While an additional six students may not sound like a lot, the effect on students’ quality of learning cannot be overstated. Most significantly, it means that teachers have less time to engage students one on one, which, as any uni student can tell you, plays a critical role in students acquiring a proper understanding of what they are being taught.

As this host of damning facts attests, our universities have been chronically underfunded by the Howard government, a fact backed up by the government’s own Department of Education, Science and Training figures which show that Australian universities were forced to defer approximately $1.5 billion in infrastructure development. These are pretty embarrassing figures for any government, but when you also take into account the debacle in vocational training that is the government’s fabled Australian technical colleges, and the government’s failure to invest in broadband infrastructure, it is perhaps little wonder that those who sit opposite are in such frenetic haste to play catch-up on education funding before the election.

Put simply, if Australia is to make the long-term economic adjustments to sustain its growth and prosperity beyond the current resource boom, we must make significant and long-term investments in our education capabilities. When we look to where Australia is going to get its next great improvement in productivity, we see that there is a very strong argument to say that we should be looking towards improving the standards of our education facilities. It is a sad indictment on this government that it has taken the threat of electoral annihilation for it to recognise this simple fact. After 11 long years of wasted opportunity, Australia needs a change.

In order for Australia to secure its future, universities need to have modern and adequate infrastructure. They need state-of-the-art scientific laboratories and equipment, and they need to have staff-to-student ratios that enable students to get the very most out of their learning experiences.

I am proud to say that located in my electorate of Swan in Western Australia is the world-renowned Curtin University of Technology. With over 40,000 students, including nearly 2,000 research students, and offering over 850 undergraduate and postgraduate courses, Curtin is both the largest and most comprehensive university in Western Australia and, I believe, one of the best in Australia, if not the world.

Having developed a strong reputation for quality research and an established partnership with industry, Curtin university well deserves its international reputation. However, being the local member, I often hear firsthand how this government’s failure to adequately fund education is impacting upon students’ studies. From creeping staff-to-student ratios to infrastructure construction delays, the chronic lack of funding is negatively affecting students’ ability to learn. Not only that, being in one of the many broadband black spots that dot the suburbs of Perth means many students cannot get access to broadband internet services. This government has held back our students for long enough. If universities such as Curtin are to continue their proud history of achievement and excellence, Australia requires a government that recognises the true value of education investment, not one which starts backtracking at the first sign of bad polling.

As I mentioned previously, Labor fully supports these bills. While we do hold some concerns regarding the transparency surrounding the funding decisions, and the scope available to the minister for education to make funding decisions for political reasons rather than on clearly defined criteria, the thrust of the legislation is both welcomed and desperately needed, and I commend the bills to the House.

9:58 am

Photo of Judi MoylanJudi Moylan (Pearce, Liberal Party) Share this | | Hansard source

It is a great pleasure to be able to speak on the Higher Education Endowment Fund Bill 2007 because there is no doubt that, given the ever-increasing importance of higher education in Australia, as Australians compete in all spheres on the global scale, this is a very welcome initiative that will ensure higher education that is relevant to all Australians who aspire to it. Countries such as the United States are considered to have the world’s best universities and, with emerging economies in our neighbourhood such as China’s and India’s, it is important that Australia aims to compete with the world’s finest universities and is at the forefront of tertiary education.

Our first priority should be ensuring that all young Australian school leavers who are capable of, and aspire to, higher education have that option available to them at the highest possible standards achievable. This bill ensures such a future for higher education in Australia. It is a very forward-looking piece of legislation. It looks to the future.

One of the main objectives of the government in announcing this policy initiative is to provide and conserve funds for future generations. With the only money spent coming from the earnings of the fund, this will ensure that there is a constant steady flow of money into tertiary education in perpetuity.

The endowment fund bill provides for an initial amount of $5 billion to be credited to the endowment fund, with the first round of funding to higher education institutions being available in the second half of next year. Subsequently, the Treasurer announced an additional $1 billion in the 2008 budget to boost initial higher education endowment funds by January 2008. The government estimated in the budget that this would generate approximately $300 million per annum, and perhaps we can anticipate this being a little higher due to the announcement of a further $1 billion being put into the fund.

The bill also increases the scope for philanthropic donations to be made to the tertiary sector, as the Future Fund Board of Guardians is able to accept gifts of money to be included as part of the endowment fund. This is a very welcome move. To encourage a culture of philanthropy in Australian universities, this bill will provide for the Australian public to be able to make unconditional tax deductable contributions to the endowment fund. Australian universities in the past have not been as successful as some of their overseas counterparts in attracting philanthropic donations. In fact, less than two per cent of the income of Australian universities comes from such donations. Comparable universities overseas attract philanthropic donations as high as 15 per cent to 20 per cent. So this is a splendid opportunity to add to the taxpayers’ investment through the government by allowing for individual donations. There is no doubt that more and more wealthy Australians are prepared to give generously to future research in education, and we have continued to see increasing numbers of people prepared to invest in diverse fields of study from medicine through to pharmaceuticals, history and technology. As Chair of the Parliamentary Diabetes Support Group, I am certainly aware of very generous private donations into research in that particular field. So we do have a great opportunity to boost this fund significantly.

The main purpose of the endowment fund is to make grants of financial assistance to eligible higher education institutions in relation to expenditure and research facilities. It will be used in a strategic way to promote excellence, quality, diversity and specialisation in Australian universities for years to come. The fund is clearly focused on driving universities forward, allowing them to keep up with the latest advances through excellent facilities.

Australia is a vast continent with diverse communities, and it is essential that we do not have a situation, such as that which has been proposed by the opposition, where the best education is concentrated simply in one small area, making it difficult for the wider public to access it. There needs to be attention given to ensuring a fair distribution across the states and within the regions. In determining where the money is to be invested we also need to know how decisions are made through the assessment process. This process should be made public and should be as transparent as possible.

I represent an electorate, the electorate of Pearce, which is diverse in its urban, rural and regional constituencies. I have been particularly grateful to our ministers, the former Minister for Education, Science and Training, the Hon. Brendan Nelson, and the current Minister for Education, Science and Training, the Hon. Julie Bishop, for the support they have given to locating a university campus in Midland, which is on the edge of the Pearce electorate, and for the recent announcement that an Australian technical college is to be located in Midland. I acknowledge the support given by the member for Hasluck in ensuring that one of the Australian technical college campuses will be located in the eastern corridor in Midland. Although Midland is not in the electorate of Pearce, many of the students who aspire to higher education, whether it be university education or technical education, come from the hinterland of Midland, much of which is in the Pearce electorate. Through having access in the eastern sector, many of those people who aspire to higher education, both younger and older people, now have that opportunity.

I was pleased to attend the opening day of the university campus—I think it was two or three years ago; how time passes—and I was thrilled to hear individually from the students that without the campus in Midland they would not have been able to access higher education. In the past, people in the eastern corridor have been thwarted in their ambitions because most of the universities in Western Australia are located in the western suburbs south and north of the city, making accessibility a considerable barrier to eastern area students.

My ambition for the region is to add to the university campus and the Australian technical college and to have a state-of-the-art agricultural college in the eastern sector. We now have two colleges. One is Muresk, a tertiary institution which is attached to Curtin University of Technology. I endorse the comments from the member for Swan about Curtin university. It is a university that all Western Australians can be proud of. It is the university that I studied at, so I am particularly proud of its achievements. In fact, if it had not been for the cooperation of Curtin university, it would have been difficult to have a structure for the places that our minister made available to Midland, because it was Curtin university that took up the role of managing those places. I am very grateful for the support that we had from Curtin university and, indeed, from Alan Robson of the University of Western Australia. Although he was not directly involved in the management of the places, he gave every assistance in their establishment and in recommending a structure for the development of those places. He recognised, as I did, that many of the people in the eastern corridor were people who had considerable social disadvantage and yet had the least opportunity and the most difficulties in attending universities based in the western north and south areas of the Perth metropolitan area. I welcome the support of Professor Toomey, who was then heading up Curtin university, and I acknowledge Alan Robson for his early support of the concept.

My electorate also has a very large number of Indigenous Australians, and I want to see those young people have the same educational opportunities as others in the community. In that respect I again pay tribute to the work of the former minister for education, the Hon. Brendan Nelson, who acknowledged the difficulties in retaining young Aboriginal students in schools in my area and agreed to fund some support facilities at Swan district high schools to make sure that these young people had every encouragement and support to remain in school till their final year and not drop out early. That has been very welcome and it has been a very successful program.

I think we can be informed by this. There is no doubt that, for many people who come from less affluent areas, the travel and cost of living away from home is prohibitive. There was a study done in the rural area of my electorate through Muresk—the former head of Muresk was part of this committee—that looked at the barriers to young people from rural areas entering university. Of course, some of those barriers go back to folklore. For many farming families, there has been a view in the past that you do not need a university degree to succeed in farming. That is probably true in many ways. But in this day and age, and in the global environment and highly sophisticated agricultural sector in which we now operate, it seems to me that the best education in these areas would be of great advantage to anyone hoping to succeed in these occupations in the future.

My ambition and dream for the region is to improve the state of agricultural higher education. Both Muresk, which is attached to Curtin University of Technology, and the Narrogin agricultural college, a secondary college devoted to agriculture, do an outstanding job of providing education for those who wish to specialise in agriculture. These institutions play a vital role in the state of Western Australia and, more broadly, the nation because a high proportion of our country’s rural exports are produced in Western Australia. I would like to see a lot more attention paid to resourcing the Muresk Institute, which might benefit from this measure. I would also like to see improvements made to and continual upgrading of the Narrogin agricultural college. It is a secondary college and probably does not fall within the scope of these measures, but I am sure that there are other opportunities through the portfolio to assist that particular institution. I am a former student of Narrogin Agricultural High School—or Narrogin High School as it is now called—to which the Narrogin agricultural college is attached, so I know what a great institution the college is.

In the true sense of the word, Australia is a lucky country with its great diversity. The reality is that we live in an increasingly global environment where there are unparalleled opportunities for our young people. It is paramount that graduates are able to meet the high demands of the global and local workforce and to meet the very highest standard possible. While our priority should always be our citizens when it comes to places at university, we also have a vibrant export market in education, and more and more students want to come and study in Australia. If we are to capitalise on those opportunities, it is necessary that we continue to strive for the best possible tertiary education facilities. The attractions of students coming from diverse backgrounds and other countries are many. Apart from the obvious income stream, these students bring different experiences and perspectives and open up opportunities for the development of exchanges in research and trade both now and in the future.

Although the Minister for Finance and Administration and the Treasurer will have overarching responsibility for issuing the maximum grants rules, it will be the Board of Guardians who will determine the amounts to be made available on a year-by-year basis in accordance with the endowment fund investment mandate. This bill ensures that it will be the Board of Guardians and not the ministers that determine the payment amounts and where payments will be directed. It also limits ministerial directions on investments.

Altogether, 42 Australian universities will qualify, along with the Australian Maritime College, which is scheduled to merge with the University of Tasmania next year; the Bachelor Institute of Indigenous Tertiary Education, which I particularly welcome; and the Melbourne College of Divinity. This means that Muresk, for example, as a formal campus of Curtin university, could potentially be one of the beneficiaries of the Higher Education Endowment Fund, and I certainly welcome and support any initiatives toward that end. I strongly support measures that maintain the real value of the endowment fund into the future and prevent future governments from making decisions to use these funds for other purposes. If tertiary education is to grow and improve, it is important that government creates the right environment, and a stable, reliable source of funding helps to create the optimum environment.

Credit must go to the Prime Minister and cabinet for the sound management of the economy that has created the budget surplus, which has provided the opportunity for these measures to be enshrined in legislation. It is with an eye to the future that our leaders have created such a fund. Here is a bill that focuses on driving our universities forward. This is not a fund to be used for refurbishment and general maintenance; there are other funds available for that. Rather, these funds are to provide universities with the resources they will need to establish themselves alongside the best in the world. The government’s investment alone will substantially enhance the funds that are available to be invested in the higher education sector. In fact, it will double all the existing financial investments and endowments currently held in the university sector, and I think that is very significant. It creates a legacy to be passed on to future generations.

This fund would have been difficult to establish if it had not been for the Howard government’s sound economic management. By retiring Labor’s $96 billion debt, we are no longer saddled with the huge interest bill associated with that debt. That money can now be applied to and invested back into the community in areas that secure the future of young Australians. Investing in education is critical to securing ongoing prosperity for all Australians. We need to make sure that our young people are equipped and resourced to meet the considerable challenges of the modern world. This builds on the government’s other measures in the education sector, including a $607 million Capital Development Pool and an estimated $1.5 billion over the same period for Research Infrastructure Block Grants. In addition, $59 million has been invested in universities through the Major National Research Facilities Program, with a further $540 million to be spent on the National Collaborative Research Infrastructure Strategy.

The minister reminded the House in her second reading speech—and I think it bears repeating:

We must aim for higher standards in education to support Australians in their quest to learn, to discover and to innovate. We must ensure that universities are well governed, are responsive to student and industry demand, and accountable to the taxpayers who continue to provide the majority of funding to the sector. This year the Australian government is providing a $9 billion investment in education, science and training, including the centrepiece of this year’s budget, the Higher Education Endowment Fund.

I have said it before in this place and I will say it again: one of the hallmarks of this government is that it has got the mix and balance right between university education and technical education. Under the former Labor government we had far too much emphasis on university education, and many young people felt defeated if there was nowhere for them to go if they were not capable of or did not aspire to a university education. The mix and balance is very important. Of course, I always recommend and support young people if they want to go on to a university education—they certainly should have the opportunity; we should encourage our young people to develop themselves to the best of their ability in whatever areas they are interested in and capable of developing. But to deny young people the opportunity to undertake other areas of higher education and learning, such as at technical colleges and through other college courses, is a real travesty. It often makes our young people feel that they are not worth while unless they can attain a university education. So I applaud the work our ministers have done to make sure there is that proper mix and balance available to young people and that there are different options.

Again, I have made the point that the best brain surgeon in the country cannot do his job without the technology that other people provide—there are the people who craft the finely honed and calibrated instruments that must be used, the people who care for the electrical equipment required in any operating theatre and the nurses who assist the surgeon. All these people go to make those procedures to save lives possible, and there are many other examples where we need to bring together the considerable talents and abilities of young people in whatever field they aspire to so that they can reach their best and make their best endeavours. This is an excellent, forward-looking measure, and I fully support this bill and commend the minister for her work to bring it about.

10:18 am

Photo of Lindsay TannerLindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | | Hansard source

The Higher Education Endowment Fund Bill 2007 and the Higher Education Endowment Fund (Consequential Amendments) Bill 2007 both go to the creation of the Higher Education Endowment Fund as an autonomous fund administered under the umbrella of the Future Fund—hence the need for two separate pieces of legislation, one of which focuses on the operations of the fund itself and the other of which seeks to make the structure of the fund and particularly its investment activity compatible with the wider Future Fund legislation that was passed some months ago by the parliament.

Labor support the legislation and we regard the establishment of the fund to provide for infrastructure grants to Australian universities as a long-overdue, belated gesture on the part of the Howard government to Australia’s higher education sector—after 11 long, hard years of neglect and indeed derision. Over the period of the Howard government, total government investment in higher education in Australia has slipped from 0.9 per cent of GDP to 0.6 per cent of GDP—notwithstanding the modest boost that will be provided by the revenue earned by the Higher Education Endowment Fund. It is interesting to note that the forward projections in the budget this year for government spending indicate that, even though there is an increase in spending on higher education, by the end of that four years government spending on higher education will actually be a lower proportion of total government spending than it is today. So, even though there is some increase occurring here, it is still a lower proportion of the projected trend of government spending generally.

I will concentrate my remarks on two specific provisions of the bill which are all about Labor’s national broadband proposal. These provisions apply with respect to the Future Fund legislation. They amend the Future Fund Act and they are designed to prevent a future Labor government instructing the Future Fund to dedicate a proportion of its Telstra shareholding to investment in the construction of a national broadband network. Some months ago Labor announced that, if elected, we would establish a national high-speed broadband network accessible to 98 per cent of Australians with a minimum speed of 12 megs per second and capable of upscaling. The financing for the government part of the partnership with the private sector that would be involved in constructing this network would come from two sources. The first is the $2 billion Communications Fund established by the government with proceeds from the sale of the last remaining slice of government shares in Telstra and the second is the approximately $2.7 billion of the remaining Telstra shares that are currently held by the Future Fund and must be held by it until November of next year. Obviously, the value of those shares fluctuates from day to day, but that $2.7 billion of Telstra shares is approximately one-third of the total shareholding value of the Future Fund’s holding of Telstra. With these two amendments the government is seeking to ensure that, if Labor are elected to government in the election that is very shortly to be held, we will have to legislate in order to be able to make this investment.

A number of things need to be said about this initiative by the government. The first observation is the extraordinary arrogance of what they are doing. They are seeking to prevent an incoming government, if Labor is elected, from implementing one of its key policies, seeking to ensure that they in opposition will have some prospect of blocking Labor from implementing its plan to establish a national high-speed broadband network.

You can rarely see a better example of the ‘born to rule’ arrogance that is the historic mentality of the Liberal Party than this particular piece of political posturing. They have not yet been defeated in an election; they clearly fear defeat; and they are seeking to set themselves up already as an obstructive opposition. Already they are laying the groundwork for an obstructive opposition to preclude Labor from implementing its policy with respect to a national broadband network. This is a return to the outrageous ‘born to rule’ mentality of 1972 to 1975, where the vast bulk of Labor’s commitments were blocked by the Liberal and National parties in the Senate. And, of course, ultimately an election was forced—twice, in effect, the opposition Senate forced an election when it was not due upon the Whitlam government.

The critical thing here is that there are issues on which oppositions are entitled to oppose governments in the Senate. There are plenty of examples where parties of both persuasions have done that because they have made a clear, principled commitment on the issue well in advance. There is no question about which way Labor will vote on industrial relations proposals put forward by the Howard government—similarly with the GST. There are equivalent examples on the other side where big issues of principle are involved and where they are entitled to continue to vote in the way that they believe is right.

Leaving aside the outrageous arrogance of trying to set themselves up in advance, clearly anticipating the possibility of defeat, to cripple Labor’s plans from opposition if they can, the issues here that need to be considered are: first, is there some kind of big issue of principle involved in the debate about national broadband? Is there some longstanding matter of conservative principle that is involved which dictates that the Liberal Party and the National Party should oppose Labor’s proposal? The answer is no. Are they opposed to fibre to the node? Are they opposed to high-speed broadband? No, they are not. Are they opposed to substantial public sector involvement in the provision of telecommunications? No, they are not. Two billion dollars of our proposal is to come from their own Communications Fund, which finances public sector involvement in the provision of telecommunications infrastructure. There is no fundamental issue of principle involved here.

Will the target of the Future Fund for financing long-term Public Service superannuation liabilities be jeopardised as a result of Labor’s policy? Several months ago, when we announced our broadband policy, we were told that this would be the end of the Future Fund. It would be the end of the ability of the fund to finance the long-term public sector superannuation liabilities by 2020, which, of course, is the mandate of the fund and which we supported. Within months of those florid statements being made by the Treasurer and the Prime Minister, we have reached a position where the Future Fund is now in the process of fulfilling that target, 13 years ahead of schedule. So much for all of the outrageous and ludicrous claims that Labor’s broadband proposal would effectively prevent the fund from achieving its objectives.

To illustrate that, you have nothing better than the legislation before the parliament today, which sets up with $5 billion, soon to be $6 billion, a new fund with money that otherwise was going to the Future Fund for financing higher education. So, within months of claiming that Labor’s plan for $2.7 billion worth of Telstra shares to be used to help construct a national broadband network would destroy the Future Fund and put Public Service superannuation at risk, we are now in a position already where that 2020 target is effectively being met and the debate is moving on to other uses for surpluses.

Is there any question now, if there ever was, that Labor’s broadband plan would in some way jeopardise the achievement of that 2020 target for fully financing the long-term Public Service superannuation liabilities? The answer clearly is no.

Finally comes the obvious question: if Labor are elected and we proceed to implement our national broadband plan, is there any suggestion that this will have been done by stealth—that in some way we have created a particular impression in the minds of the electorate about our policy on these issues and that, having been elected, we will then proceed to do something different? The answer clearly is no. So what the government is seeking to do here is to ensure that it is as well armed as it can be to frustrate an incoming Labor government, if we are elected, in implementing one of our key policy positions—one of the key issues that will undoubtedly have a significant role in the election campaign and, if Labor are elected to government, will rightly be seen as one of the key policies which has persuaded people to vote Labor into office.

This is a remarkable testament to the ‘born to rule’ arrogance that is never far below the surface in the Liberal Party. We have not even had the election, and already they are demonstrating that they will not be prepared to accept the result if Labor are elected—already they are demonstrating that, and we have not even gone to the polls.

A particularly exquisite irony in this regard is that the debate about the prospective use of surpluses has already been moved by the Prime Minister to the question of infrastructure. A couple of years ago Labor indicated that we intended to use some of the revenue earned by the Future Fund for the purpose of investing in infrastructure. At that time, of course, this was derided by the government, and, more recently, when we put forward our broadband proposal, which was a concrete manifestation of that commitment, equally it was derided by the government.

What is happening now? The Future Fund is on the verge of fulfilling its obligation to fully fund the Public Service superannuation liabilities by 2020; we are in the process of establishing what will now be a $6 billion Higher Education Endowment Fund with money that would otherwise have gone to the Future Fund, and indeed will be managed by the Future Fund; the government has flagged a health and medical infrastructure fund equivalent to the Higher Education Endowment Fund, which no doubt it will seek to establish in due course—it too will be operated by the Future Fund along the same lines—and the Prime Minister has flagged the prospect of establishing some kind of infrastructure fund in the wake of these two additional funds. In other words, the government has finally got into a similar position, broadly, to the Labor Party, while still continuing to make ludicrous and outrageous accusations about the implications of Labor’s position and, in the instance of the legislation before the parliament today, seeking to do everything it can to prevent Labor from implementing its policy should it be elected to govern Australia.

The one message I can give the Howard government on this issue is that we will not be diverted and we will not be scared by its political posturing. We are committed to fixing the broadband shambles that we will inherit if we are elected to govern Australia. We are committed to implementing our high-speed national broadband plan. The plan recently cobbled together by the government, in a panic, for WiMAX wireless in regional Australia is a second-rate solution. It will ensure that people in regional and rural Australia have a second-tier quality and level of service compared with people in metropolitan Australia. The spectrum that is used for this proposal is subject to interference. The technology cannot properly project through buildings and geographical impediments, otherwise known as ‘hills’. Existing laptops are not compatible with the technology. It is notable that the government, when advertising the merits of its plan, changes its language quite a bit but most of the time says it will deliver up to 12 megs per second. Labor’s plan is for a minium of 12 megs, and in most cases it will be a lot faster than that. The government is claiming up to 12 megs. That will only apply when there is not a congested network. This technology is very susceptible to congestion crowding out people’s speeds. It will only apply when the weather is good and there are no geographical obstacles. The government’s claim that this technology will provide up to 12 megs should be taken with a grain of salt.

It is worth noting that if you look at the website of the Department of Communications, Information Technology and the Arts you will see the maps that were distributed in a great flurry when this proposal was announced. You will also see a disclaimer on the website that essentially says: ‘The department makes no claims and takes no responsibility for the accuracy of any of these maps or for their meaning. The department does not rely on them and does not accept any liability or responsibility if anybody else does.’ In other words: ‘The maps are rubbish. Believe them at your peril.’ All the government is doing, in a panic after having allowed the issue to fester for years and having failed to tackle the problem, is setting up a second-rate system for people in rural and regional Australia, once again trying to look like it is doing something.

We will not be deterred on this issue. Broadband is fundamental to the future of this country. It is fundamental to young people’s ability to learn, to small businesses’ capacity to compete, to the Australian economy’s capacity to grow and to productivity’s capacity to grow. It is an absolute disgrace how the Howard government has handled this issue. It is extraordinary how it constantly comes up with new, supposed plans and announcements that are all mickey mouse symbolic things designed to make it look like the government is doing something without addressing the underlying fundamental problem.

I will conclude with one observation. Having been shadow communications minister for three years from late 2001 to late 2004, I have naturally been interested in these developments and debates in recent times. One thing has struck me with a degree of irony. For all of those three years when I had responsibility on behalf of the Labor Party for advocating, amongst other things, the retention of Telstra in majority public ownership, I had a single mantra, a single statement, that preceded everything I said in public—at public meetings, on radio and television and in newspaper media. Everything I said in public on the issue of Telstra privatisation commenced with these words: ‘A privately owned Telstra will be a giant private monopoly too powerful for any government to effectively regulate.’ Guess what has happened. This is precisely the stalemate that the Howard government has found itself in, courtesy of its own obsession with privatisation. You now have Telstra—understandably, justifiably, acting in defence of its own interests—no longer answerable to the public interest, no longer answerable to the national interest through government ownership. It is there to defend its shareholders and it is doing that vigorously. Why should it do anything else?

Because Telstra still comprises roughly two-thirds of the entire telecommunications sector and still owns and controls the dominant monopoly telecommunications infrastructure in this country, and because it is very difficult for anything to occur, such as the establishment of a major national broadband network, without the involvement or acquiescence of Telstra, the government has created a shambles because of its obsession with privatisation. The government is now caught in a stalemate, a gridlock, on broadband because its only concern in telecommunications has been to sell Telstra—not to solve problems and to get Australia into the 21st century with a top-class, internationally competitive telecommunications network but to pursue its obscure ideological obsessions on privatisation. The end result is that it is very difficult to fix the problem. The government clearly has no idea what to do. It has been wallowing, working on endless small initiatives that are designed to look like it is solving the problem, but it does nothing to fix it.

This disaster is a creation of the Howard government’s making. That is why Labor is committed to fixing it. That is why we are committed to mobilising a very large sum of government capital, all of which is currently invested in telecommunications related assets, in order to invest in a national high-speed broadband network with a private partner to solve the problem. And the problem is that we have third-rate broadband in this country—too slow, too expensive and not accessible enough. That is the problem that we are going to tackle and no number of political stunts, like the amendments that have been tacked on to this legislation today, will deter us from that commitment. If we are elected to government, we will fight long and hard to ensure that all Australians have access to internationally competitive high-speed broadband. If the Liberal and National parties lose the election and they want to take that kind of obstructive position that they are clearly flagging in this legislation today, after having been defeated on issues like this, they will have to account to the Australian people for their behaviour.

10:38 am

Photo of Dick AdamsDick Adams (Lyons, Australian Labor Party) Share this | | Hansard source

The provisions of the Higher Education Endowment Fund Bill 2007 have been modelled on the provisions of the Future Fund Act 2006. The bill provides the Future Fund Board of Guardians with statutory powers to manage the investments of the Higher Education Endowment Fund, the HEEF. The bill also provides that, as per the Future Fund Act, the Treasurer and the Minister for Finance and Administration are the responsible ministers. In this capacity they will issue directions to the board about the performance of its investment functions. The board is therefore accountable to the Treasurer and the finance minister for meeting its obligation to manage the HEEF in accordance with the requirements of the act and directions. The responsible ministers will make the determination to credit government contributions, initially $6 billion, to the Higher Education Endowment Fund and any future government contributions. The responsible ministers are also responsible for setting rules to determine the maximum amount available for payments from the HEEF. The HEEF advisory board will be established to provide advice to the education minister on grants. Because of the different nature and intent of the HEEF compared to the Future Fund, the education minister, not the responsible ministers, is responsible for authorising grants of financial assistance to eligible higher education institutions and for appointments to the HEEF advisory board.

Although the ALP welcomes the fact that the Future Fund and the Higher Education Endowment Fund are for investment in Australia’s long-term national interests, including the objective of meeting public sector superannuation liabilities, there are some serious concerns. Because of the government’s failure over 11 years to invest adequately in Australia’s higher education, on the government’s own analysis there exists a significant backlog of deferred infrastructure maintenance, estimated at $1.5 billion for the university sector—$1.5 billion in maintenance for our university sector is an enormous amount of money.

The Group of Eight universities estimated in 2006 that the total deferred maintenance liability was $1.53 billion across the Go8 universities alone. So we are probably looking at a lot more than $1.5 billion. The principal reason behind this backlog is the fact that, since it came to power more than 11 years ago, the government has undermined the higher education sector by cutting university operating grants, including in its 1996 federal budget cutting university operating grant funding by a cumulative six per cent over the forward estimates from 1997-2000, resulting in $850 million in cuts to the sector. As a proportion of total revenue, Commonwealth grants to universities have decreased from 57 per cent of their revenue in 1996 to 41 per cent in 2004, while university revenue derived from fees and charges has increased from 13 per cent in 1996 to 24 per cent in 2004.

There are also widespread concerns that, over time, the HEEF could be used to replace existing capital and infrastructure programs in higher education, notably the Capital Development Pool, the Institutional Grants Scheme, the Research Infrastructure (Block Grants) Scheme and the National Collaborative Research Infrastructure Scheme. Despite these belated measures, the government has not put in place a long-term plan for meeting Australia’s infrastructure needs, including a national broadband network. Instead, it has produced 18 piecemeal broadband proposals in the past 11 years.

The so-called radical plan announced recently imposed a two-tier broadband solution for Australia through the 17th and 18th broadband plans. This included an election stunt designed to delay the building of a high-speed fibre-to-the-node network in the major cities which, through the Broadband Connect Infrastructure Program, subjected millions of Australians living in regional and rural Australia to a second-class broadband network that is based on an obsolete technology and is capable only of delivering average connection speeds at twice today’s average. To add insult to injury, this government has become embroiled in legal action involving preferential dealing in the Broadband Connect Infrastructure Program after moving the funding goalposts for the program while only informing one participant.

In contrast to the government, Labor is committed to building with the private sector a national broadband network that includes a fibre-to-the-node network that will deliver minimum connection speeds of 12 megabits per second to 98 per cent of the country. The remaining two per cent will receive a standard of service which, depending on the available technology, will be as close as possible to that delivered by the fibre-to-the-node network. Therefore, the opposition’s second reading amendment includes a condemnation of the Minister for Communications, Information Technology and the Arts for hastily signing a contract worth $958 million on the Sunday afternoon after APEC, subject to ongoing legal action and possibly against Commonwealth legal advice.

Our education system is in crisis and, although the funds are desperately needed, this government has failed to target the real needs in the system. It is now quite apparent to everyone that this country has failed to ensure that there are enough people training to take on professional and trade jobs in the future. The Australian economy needs an education revolution. There is a critical link between long-term prosperity, productivity growth and human capital investment which argues that we cannot take our current prosperity for granted. Not only is productivity growth beginning to slow; resource prices are likely to unwind over the coming years, the ageing of the population will place significant pressure on public finances and will reduce workforce participation, and the global marketplace is becoming increasingly competitive as China and India continue their transformation into economic superpowers.

Australia’s future economic prosperity is tied to the skills and productivity of our workforce. For Australia to compete successfully in the global economy, we must invest in the human capital of our nation and build a highly skilled workforce that can compete with the best of our neighbours. We do not want to end up becoming China’s quarry and Japan’s beach. This is important not just for our nation’s economic future but for the future prosperity and wellbeing of Australians.

An individual’s job prospects and the income they ultimately receive are closely linked to the level of education they have attained and the personal and professional skills they hold. In a time of acute skills demand, Australia needs highly skilled and educated workers with a commitment to lifelong learning and an ability to adapt to the future demands of technology, industry and the economy. If our goal is to have the best trained and best qualified workforce in the world, then clearly we must do more in the skills and training area.

The challenge therefore is twofold: Australia needs to lift the number of students who complete senior secondary school and to increase the number of people with vocational and skilled trade qualifications. To increase productivity for the nation and to improve the likelihood of maintaining meaningful, secure employment for individuals, Australia needs to ensure our skilled workers are highly educated, with strong literacy and numeracy skills. For too long, skills and training have been seen as an alternative to education. Broad economic and social trends are changing the structure of the economy, the size and structure of our workforce, the skills needed by workers and what is required of our education and training system.

If we are to address the economic challenge of an increasing demand for skills, we must widen the range of opportunities available to students in our secondary school system. Demand for workers with vocational education and training and trade skills is rising. According to the Howard government’s own statistics, Australia will need 240,000 more skilled workers by 2016.

I do not think this government has even considered these needs with this endowment fund legislation. So, while it is pleasing to see funds allocated to education, there needs to be a radical rewrite of how they should be allocated. The opposition makes some suggestions in the second reading amendment, but a lot more work will be needed to cope with the needs of the Australian workforce in the future. I believe we will need a change of government and a federal Labor minister to do that.

10:50 am

Photo of Ms Julie BishopMs Julie Bishop (Curtin, Liberal Party, Minister Assisting the Prime Minister for Women's Issues) Share this | | Hansard source

The House has before it two bills to support the establishment and operation of the Higher Education Endowment Fund. The fund is an unprecedented investment in higher education in Australia. By establishing this $6 billion perpetual fund, universities will have access to funds for future capital and research facility needs for decades into the future. Further contributions to the fund will depend on continued strong economic management and budget surpluses. The government has already demonstrated its commitment to the fund by recently adding an extra $1 billion to the $5 billion announced on budget night last May.

The Higher Education Endowment Fund is a true endowment fund, with the requirement in the legislation to maintain its real value over the medium to long term. The grants distributed from the endowment fund will be directed towards promoting excellence, diversity, quality and specialisation in Australian universities. This will build on the already significant reputation of our universities and further contribute to their capacity to compete on the world stage.

Underlying this is an appreciation of how important a well-run and responsive university system will be to Australia’s economic development over the coming decades. In an increasingly competitive global environment, universities will need to clearly identify their strengths and focus their resources. In keeping with this, grants from the endowment fund will be strategic in nature and will focus on achieving the long-term goals of the sector. Other higher education funding programs such as the Research Infrastructure Block Grants, the National Collaborative Research Infrastructure Strategy fund and the Capital Development Pool will continue, as they serve a very different purpose.

I will be advised on the distribution of funds by an independent Higher Education Endowment Fund Advisory Board. In making appointments to the board, I have drawn on suggestions from the sector, from the Business Industry Higher Education Collaboration Council and from the Academies Forum. I expect to announce the board in coming days. The role of the advisory board will be to advise me on the best way to implement and manage the endowment fund. This will include conducting stakeholder consultations, developing program guidelines, making recommendations in relation to grants for capital expenditure and research facilities and advising on philanthropic donations.

The Higher Education Endowment Fund Bill 2007 is the first step in the endowment fund legacy. The main provisions of the bill allow for the movement of moneys into the endowment fund and for those moneys to be invested for the future. Responsibility for investment of the endowment fund rests with the Future Fund Board of Guardians. The bill also provides that, consistent with the Future Fund Act, the board of guardians will be guided in its activities by an investment mandate, a collection of ministerial directions issued by the responsible ministers—the Treasurer and the Minister for Finance and Administration. The investment mandate will set out the benchmark return expected by the responsible ministers. The returns available for distribution to the sector will be linked to the performance of the market. International experience suggests that, in using such a strategy over the medium term, around five years, the level of grants that can be made from the fund should become predictable. However, in the short term there may be some volatility.

The bill further provides for good, sound governance in the management of those moneys. It establishes appropriate safeguards around ministerial intervention and financial management. For example, the bill provides that ministers cannot direct the board of guardians to use the assets of the endowment fund to invest in a particular financial asset or support a particular business entity, activity or business. Such requirements provide assurance that Australian government funds are being appropriately managed as well as providing assurance to the Australian public that the endowment fund will be maintained in perpetuity.

Income from the endowment fund will be distributed as grants to support capital expenditure and research facilities. These grants will promote excellence, quality and specialisation in Australian universities for years to come and will allow more world-class institutions to emerge. The bill does not go to the detail of how the grant funding programs will operate. I want to ensure that the sector has a genuine opportunity to engage with this exciting new initiative and provide input. The guidelines outlining how the funding program will operate will take into account the outcomes of consultation with the sector. There is no requirement for this level of detail to be included in the legislation. It is important that, as the program evolves, specifics about the application process, for example, are able to evolve with it.

Higher education is not a static entity. Strategic priorities change over time, as knowledge and technology change. Allowing for the endowment fund program to also change over time is essential to meeting the needs of the sector and the objectives of the endowment fund. As to the eligible institutions, consistent with the government’s aim of encouraging diversity within the sector, all Australian universities, plus the Australian Maritime College, which is scheduled to merge with the University of Tasmania on 1 January 2008, the Batchelor Institute of Tertiary Education and the Melbourne College of Divinity will be eligible to apply for funding—that is, those institutions listed under table A and table B of the Higher Education Support Act 2003 which are currently eligible to receive capital funding from the Australian government.

On the issue of philanthropy, with the establishment of the endowment fund the government has created a new avenue for business and the general public to make philanthropic donations to the sector. In the first instance, the bill provides that tax deductible gifts of money to the endowment fund will only be able to be accepted on an unconditional basis. At the time the endowment fund was announced, the government indicated that contributions could be earmarked for particular universities and that universities could choose to have their own philanthropic funds managed along with the endowment fund. These issues will be addressed following more detailed consultation with the higher education sector and the board of guardians. The government may then consider amendments to the legislation.

As to consequential amendments, in order to support the establishment and operation of the Higher Education Endowment Fund, amendments to the Future Fund Act 2006 and the Income Tax Assessment Act 1997 are required. As previously stated, I have been assisted in the preparation of this bill by the Treasurer and the Minister for Finance and Administration in their capacities as responsible ministers under the Future Fund Act. Broadly, the amendments to the Future Fund Act extend the functions of the board of guardians to include its functions under the endowment fund act. The bill also makes it clear that there are two investment mandates that the responsible ministers can issue to the board: one for the Future Fund and one for the endowment fund. Correspondingly, the bill clarifies that the board has two investment functions: one for the Future Fund and one for the endowment fund.

As is provided for in the endowment fund bill, this bill amends the Future Fund Act to set out the limitations of the Future Fund investment mandate. The amendments will ensure that the Future Fund is not invested in a way that is inconsistent with the Future Fund’s objectives. In line with responsible governance practice, the bill also specifies that the responsible ministers cannot direct the board to use the assets of the Future Fund to invest or support particular financial assets. The Income Tax Assessment Act is also being amended to allow deductible gifts of money to be made to the endowment fund. These bills represent the social dividend of strong economic management. I commend these bills to the House.

Photo of Duncan KerrDuncan Kerr (Denison, Australian Labor Party) Share this | | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Perth has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Question put:

That the words proposed to be omitted (Mr Stephen Smith’s amendment) stand part of the question.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.