Senate debates

Tuesday, 2 December 2014


Higher Education and Research Reform Amendment Bill 2014; Second Reading

4:40 pm

Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | Hansard source

As I indicated just prior to question time today, I cannot in good conscience support the Higher Education and Research Reform Amendment Bill 2014. I think it is important to, firstly, correct what I said earlier where I had indicated in my second reading contribution that full fee-paying places for international students were also introduced. In fact, it is for domestic students as well which will allow universities to enrol students beyond the government mandated caps. That was in the context of a number of higher education reforms. There has been a significant impact on access for students, in terms of opening up the sector, that was introduced by the Gillard government, which uncapped university places and opened up the sector to greater numbers of students. This has had a significant impact on access for students, particularly those from lower socioeconomic backgrounds—which is important and essential. The Rudd-Gillard governments, however, did not introduce higher rates of funding per student and, as I mentioned earlier, cut significant amounts from the higher education budget. I think it is also important to put in context the implications of a number of these changes that are being proposed.

A good commentator to go to, whether you agree or disagree with him, is the economics editor for The Sydney Morning Herald, Ross Gittins, who has made some interesting points that I think are both thought provoking and thoughtful in their contribution. Shortly after the changes were announced, Mr Gittins, in an opinion piece in both The Age and The Sydney Morning Heraldso the Fairfax Press—made the point:

The more economics you know, the less certain you can be about how things will turn out.

How true that is. And he talked broadly about the issue of deregulation and how the government was planning to:

… cut its contribution towards the cost of courses by an amount that averages 20 per cent.

Then he noted that the government was planning to:

… reduce the annual indexation of its contribution, switching to the consumer price index which does not rise as fast as unis, wages and other costs.

Mr Gittins made the point that there appears to be:

… excessive faith in the ability of market competition to foster increased efficiency, constrain price increases and ensure customers get high quality.

In terms of the higher education sector, we are not talking about an ordinary product; we are talking about a sector where it is anything like a market. The point Mr Gittins made, and I agree with him, is that universities, its so-called 'firms':

… are owned by the state governments and highly regulated by the federal government.

And there is:

… a string attached: fees charged to local students may not exceed those charged to overseas students.

…      …   …

In effect, universities have a government-regulated monopoly over a product that gives young people access to the country's highly paid jobs.

I think it is fair to say—I agree with Mr Gittins—that:

Demand seems highly "price inelastic" - unresponsive to price changes.

It is interesting to note this comment made by Mr Gittins:

In the early noughties, the Howard government allowed unis to raise their fees by 25 per cent. One small uni decided not to do so. It found its applications from new students actually fell. So the following year it put its fees up like all the others and its applications recovered.

So it seems that sometimes price is taken to be an indication of quality, when that is not necessarily the case.

It is also worth pointing out that, although the overall spending on universities as a percentage of GDP in Australia is about average amongst the OECD economies, the proportion paid by government was the third lowest by 2004. That is a real issue that we need to consider. There is also the issue of a moral hazard if we have a deregulated system. In circumstances where there are more and more students, having this link between HECS and deregulation is a double whammy for this sector. Perhaps it is overly ambitious on the part of the government. What happens in circumstances where the university has more students and more students are incurring a greater debt? There is a moral hazard because, if that debt is not paid, then it is the taxpayers who have to pick up the bill. I wonder what modelling has been done to determine whether there will be an increase in those unpaid or bad debts. It has been a much bigger issue in the United Kingdom, but I suspect that is due to the fact that there are many students from the European Union who go to universities and then go back to their home country and do not have to pay for the education that they got at a tertiary institution in the United Kingdom.

So there is an issue in terms of safeguards for students, but there is also that fundamental issue that the government said that they would have 'masterly inactivity'. That was the term used by the Prime Minister, as opposition leader, early last year when he spoke to the Universities Australia Higher Education Conference here in Canberra.

I agree with Mr Gittins when he says, 'There ain't a lot of precedent for this radical experiment.' And this is a very significant and radical experiment. The challenge is that we want as many people as possible to be able to access the form of higher education that suits them. Under the current, uncapped system, many more people can attend university, but that means a higher cost to the government, so do we cap the number of places and restrict the number of people who go to university but have it at a lower cost for them, or do we make sure as many people as possible can attend but find another way to fund it? It is vitally important for both students and universities that we get this right.

My hope—and I think it is a forlorn hope in terms of what we have seen both in the previous parliament and this parliament—is to have a bipartisan consensus on whatever scheme is decided on, because that is the best way to give certainty to the higher education sector. That way you get, ultimately, certainty. That is why I think it is important for the debate to include all the options. I see that Senator Kim Carr, the opposition's higher education spokesperson, the shadow minister, is in the chamber. There is an important role for the opposition to come up with alternatives, given the pressure on the system.

It is also important to remember the importance of private providers in higher education. They can offer more targeted and flexible services for students, and they fill a valuable niche. They need to be a vital part of whatever scheme goes ahead in the short or longer term. I want to acknowledge Tabor college in Adelaide. Reverend Don Owers is a man I have enormous respect for. His proper title is principal of that college, which has a very good reputation, not just as a teaching college—offering theological courses and the like. I have enormous regard for him. I know that Reverend Owers has been very keen for these reforms to go through, but in good conscience I cannot support them.

It is also important to note what happened with VET, vocational education and training, in Victoria, where the system was rorted. I am not suggesting there would be the same potential for that to occur here, but we need to learn the lessons of what occurred in Victoria with vocational education, where there have been extraordinary shifts in that market. Maybe Senator Carr can correct me if I am wrong on this, but I think that one or two providers in the last couple of years have managed to snatch 20 per cent of the market, with all sorts of inducements and incentives. I have concerns about the quality involved with that. It is important that we learn from those mistakes. I am not equating the two sectors, but I am saying that it is important to learn from that.

The point that commentators, including Ross Gittins, have made is that university administrations are not necessarily as lean as they can be, but it is unsure whether this system will impose the necessary discipline upon them. What is proposed is that they can have uncapped fees, deregulated fees, and, if students do not pay them back, then the taxpayer picks up the tab. I do not think that is necessarily the best way to impose a discipline to keep fees down.

I note that several amendments have been circulated or proposed, and I understand there may be more to come. My colleague and friend Senator John Madigan has put up a number of proposals and suggestions. I am not sure if they have been circulated yet as amendments. I know that Senator Madigan has done this in absolute good faith, to get a better outcome. The implications of some of those amendments need to be looked at in a constructive way, because I think that what Senator Madigan has attempted to do is quite worthy. It is vitally important that we take the time to consider these amendments in more depth so that we can be sure that they achieve their aims. It is also important that we look at alternative methods of funding and look at issues of equity. Economists such as Ross Gittins make the point that there could be all sorts of unintended economic consequences in what is being proposed. We need to be very wary of that.

Tertiary education is not an ordinary product. It cannot be expected to conform to the usual market structures. For many people, participating in higher education is both an emotional and a financial decision. People may choose to attend a university because of its reputation, its convenience, its course selection, even its campus life or a combination of all of those things. We cannot expect people to undertake higher education based solely on financial reasons.

Without the appropriate safeguards in place, the market may become skewed and some providers may start to take advantage, unfairly, of students. For example, in higher education, prestige can add significant value; for many, a higher price signals greater prestige. This could clearly be open to abuse by providers, who would raise their prices simply to seem more prestigious or to signal a higher intrinsic value. I think it is also worth considering what Lord Browne did in his— (Time expired)


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