Senate debates

Tuesday, 17 March 2015


Higher Education and Research Reform Bill 2014; Second Reading

5:59 pm

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

I compliment Senator Lambie for a very well-researched speech outlining her concerns. The reference to The Economist magazine in relation to the US system reminds me of the documentary film Ivory Tower by filmmaker Andrew Rossi. That documentary, which I think is a couple of years old, makes the point that skyrocketing tuition prices, private and public; rapidly evolving social attitudes towards the value of a college degree; and the inevitable changes wrought by technological growth and economic disaster have had a huge impact on that sector. I am referring there to a review of the film in Variety magazine. Ivory Tower relates directly to the matters raised in The Economist magazine. Republican congressman Paul Ryan also spoke about this issue. The Variety film review states:

One of the documentary’s key points is that most colleges are no longer selling an education but an experience, happily spending millions of dollars on plush housing complexes and state-of-the-art recreational facilities in a bid to entice as many applicants as possible. It’s the students who pay for these campus expansions, and not just financially: Too many schools, in the film’s somewhat over-generalized estimation, have allowed academic rigor to fall by the wayside, a problem that can be attributed in part to an excess of administrators and a dearth of dedicated teaching faculty. One particularly alarming statistic — that 68% of students at public universities fail to graduate in four years — is introduced by way of a visit to Arizona State U., whose party-school rep is reinforced here by footage of a massive swimming-pool bacchanal that resembles an outtake from “Spring Breakers.”

Clearly we do not want to go down that path.

Senator Lambie made reference to Scandinavian countries. There is a book that I am hoping to plough through soon called Northern Lights: The Positive Policy Example of Sweden, Finland, Denmark and Norway by Andrew Scott, an Australian academic. I think we need to look at it. I think the temperament of Australians is closer to that of the Scandinavians than to that of the Americans. But, even so, it seems that what the government is proposing in this deregulated model is more radical than anything that has been tried in any OECD nation, apart from New Zealand, which went down this path of total deregulation a few years ago but then had to retreat from it because it did not work. It was a public policy mess.

At the outset I believe it is incredibly important to acknowledge that the current system of funding to universities is unsustainable. Having a demand-driven, uncapped system means that something has to change. We either go down the path that Senator Lambie has indicated, where we have to find a lot more public money for our public education, or we need to take a different approach. This requires a nuanced and sophisticated approach in terms of looking at alternatives.

I do not believe that anyone in this debate disputes the fact that our current system of funding is unsustainable. However, I do not believe that deregulation is necessarily the best option for solving this problem. The government seems to be shifting on its proposed measures. If nothing else, I think that Minister Pyne is incredibly flexible—more flexible than a yoga instructor sometimes. There has been a lack of preparation and consultation before such a quantum leap in higher education policy. The government went to the election with a promise of 'masterful inaction'. That is what the Prime Minister, as opposition leader, said two years ago in respect of higher education. This is not masterful inaction; this is the biggest, most radical shake-up this country has ever seen in higher education. The government have not gone about this in a proper way in their approach to policy formulation. I am a bit old-fashioned: I think the old days of having white papers and green papers in order to have a proper process of policy formulation has much to commend itself. That is what the Hawke-Keating government did and that is what the Howard-Costello government did, and they did it very well, by and large, in getting it right in dealing with these issues.

What happened on the weekend is that Minister Pyne threatened to shut down NCRIS, the National Collaborative Research Infrastructure Strategy, the very backbone of research in this country involving the 1,700 scientists funded by it—some of our best and brightest minds—and providing a backbone for research infrastructure not just for universities but for businesses, for absolutely groundbreaking innovation that can make a difference, whether in the wine industry in my home state, whether in medicine, whether in a whole range of telecommunications. That is all about the clever country. What the minister said on Sunday was extraordinarily foolish on his part. I bear some responsibility. The minister was a student of mine some 27 years ago at what is now the University of South Australia, so I guess I have taught him everything that he does not know. I think the minister's interview with David Speers yesterday, if not already a cult classic, will become a cult classic. The last 24 to 48 hours have been a very unfortunate exercise. I give the minister full marks for being indefatigable in relation to this issue, but I cannot accept what the government is doing. I cannot support it.

In the budget last year—it seems so long ago, but in some respects it only seems like yesterday—the government wanted to bring about these reforms with significant savings, with cuts to the sector that would have saved billions of dollars over the forward estimates. We now have a situation where the government is looking at spending another $1 billion to $1½ billion a year. Perhaps Senator Carr can help me out on that. It seems there has been a complete reversal of fortune in terms of what the government is proposing. It is now going to cost a lot more money.

Deregulation is not something that can be easily undone. Once you have the deregulation genie out of the bottle, you cannot put it back in. We have to be very careful about this. We need to have a full understanding of the implications, particularly those in the longer term, before we make such significant changes. My argument has always been that this is not an ordinary market that we are dealing with. This is not an ordinary case of supply and demand.

Ross Gittins, the economics editor for The Sydney Morning Herald, in his opinion piece entitled 'Why "competition" means university fees will rise', published on 31 May 2014, makes a very good point. Even according to one of the authors of the Kempt-Norton report, Andrew Norton, 'the initial increase will be no more than $6000 a year' in fees. But that is still an increase—a very appreciable increase. Mr Gittins makes the point that:

The simple model of how markets work taught in introductory economics courses leaves many people with excessive faith in the ability of market competition to foster increased efficiency, constrain price increases and ensure customers get high quality.

This is not an ordinary market it does not work like that. This is different by virtue of HECS: the HECS Support fee allows students get support to fund their higher education. Gittins makes the point:

There's no profit motive. And, as any academic will tell you, unis are highly inefficient, bureaucratic organisations dominated by administrators. The safest prediction is that giving unis greater revenue-raising ability will lead to them employing more administrators.

How can uni fees be regarded as a ''price'' in the textbook sense when people are lent the money to pay the price under a concessional loan they won't have to repay for years?

In effect, universities have a government-regulated monopoly over a product that gives young people access to the country's highly paid jobs. What will they do when the price jumps - abandon all ambition? Demand seems highly ''price inelastic'' - unresponsive to price changes.

The one point that Gittins makes that, I think, proves that is: back in 2004, as I understand it, the Howard government, through Brendan Nelson as education minister, allowed universities to increase their fees by a maximum of 25 per cent. Invariably, all universities increased their fees by 25 per cent, bar one. That university thought that there was a competitive advantage: 'We'll charge a little bit less and more students will come flocking to us.' Guess what? That university saw a collapse in its enrolments and had to increase its fees up by the full 25 per cent the following year.

This is not an ordinary market; this is why deregulation needs to be treated very carefully in the context of this debate. I want to consider the issue of how to cut the Gordian knot of university funding in a way that is equitable, fair and will work in the long term so that we do not end up with a US situation, as described in the documentary, Ivory Tower. I wrote to Minister Pyne on 20 January 2015—it seems much longer ago—and I am very happy to provide my colleagues with a copy of this letter, which was sent publicly to the media, unions and university administrators, which, as a courtesy, I let the minister know that. I suggested to the minister, respectfully, that there ought to be a useful way forward to establish an independent panel to undertake a root-and-branch review of Australia's higher education sector. A review that took into account the role the sector plays in Australian society, both in economic and social terms. It should be a review that looks at where we want to go and how best to get there, both in a local and global context. I suggested it could take up to 18 months, but it could take much less than that, if it were done with some alacrity, if it were done properly and if there were a panel of experts and terms of reference with cross party support—government, opposition and crossbenchers in this place and in the other place. There needs to be consensus on the terms of reference and on the panel of experts, where there can be a robust debate and robust analysis about where sector is going. I suggested that, as an interim measure, universities should be allowed to increase their fees to a cap to allow them to recoup any government cuts. Well, those are now off the table. I understand the funding pressures of universities and there ought to be—as unpalatable as it may be for some—some modest increase in university fees, if such a funding crisis emerges in the higher education sector. That is something that would give us some breathing space, so we may try to get the policy settings right once and for all.

The findings of the panel would presumably be a template for government reforms and, hopefully, have cross party support. The government should implement any measures necessary to allow universities to increase their fees in accordance with the funding. I think the terms of reference should look at the current role of the higher education sector in Australia, the higher education experience of students studying in Australia and how Australia measures up in terms of the world's best practice. We need to avoid the pitfalls of other countries which have gone down difficult paths that have not worked in terms of student outcomes and have cost the budget's bottom line and cost students themselves. I suggested that this review could be comprehensive in much the same way as the Murray report, which in 1957 provided a detailed study of universities in post-war Australia for Prime Minister Menzies. I hasten to add that the Murray report was not written by David Murray—it has not been around that long. The 1957 review was written by another Mr Murray, but it is a very useful report and it is worth reading to see the sorts of challenges which they faced then and which are echoed in some of the problems we face now.

The minister has not taken up my suggestion, and more is the pity. Maybe he needs to look at that; maybe we need to have some bipartisan, cross party way of dealing with this very serious issues in the sector. If the government will not do that, then the government needs to look at the usual green-and-white-paper process to ensure that a proposal has been appropriately and thoroughly discussed, debated and modelled. This may seem cumbersome to the government, but so far the policy formulation in this area has not worked, despite the best endeavours of the minister's office and there are some very capable people in his office.

We have recently seen proposals by Professor Bruce Chapman that would implement a progressive taxation on universities to reduce the Commonwealth subsidies by a certain amount if their fees rose above a certain level. There are various gradations and variations that. Unfortunately, I was not able to meet Prof Chapman today, but I hope to be able to speak to him in the next day or so. The concern is: what effect will it have for the so-called sandstone universities—the Group of Eight universities—when compared to other universities? Will we see a significant inflationary effect in respect of that? We need to have some modelling. I understand that perhaps the department has done that modelling, but that needs to be out in the open. I have not seen the modelling. We need some transparency in this process.

An article in The Sydney Morning Herald on 17 February by the enigmatic Matthew Knott, under the headline 'Fee deregulation will drive up deficit', says that NATSEM, the National Centre for Social and Economic Modelling, the same people that the coalition used when in opposition for the modelling of their policy formulations—so I reject any suggestion that they are anything other than a pretty robust organisation in terms of their modelling—have suggested:

The Abbott government's plan to deregulate university fees would likely drive up inflation and drain billions of dollars from the budget over the long term rather than saving taxpayers money as originally intended …

In other words, this would be not a zero-sum game but a negative game in the sense that it would actually cost taxpayers more money because it would also have an inflationary effect.

I also think that the debate has lacked a nuanced approach in terms of some of the other issues that need to be tackled, and the best way of summarising that is in a new book that was dropped off to my office yesterday—and I should disclose I will make sure I pay for it, Mr Deputy President!—called Universities and Innovation Economies: The Creative Wasteland of Post-Industrial Society, by Professor Peter Murphy of James Cook University. I am trying to get in touch with Professor Murphy and I am looking forward to discussing this with him. But even just a summary of the book resonates with me in terms of some of the issues we face in this sector. This is what it says:

Students drop out of universities in large numbers, many graduate to jobs that do not require a degree and a large number learn little at university, whilst graduate salaries have shrunk over time and student loan debt and default have grown. University research achievements have declined while university administration has expanded massively. The contemporary university is mired in auditing, regulation, waste and aimlessness and its contribution to serious social innovation has deteriorated markedly. The miserable state of the universities reflects a larger social reality, as bureaucratic capitalism has replaced creative capitalism.

I am not necessarily endorsing what Professor Murphy is saying. What I am saying is that this debate has not looked at the issue of university dropout rates, which are very significant in terms of what they cost taxpayers but, more importantly, what they cost students in the months and sometimes years of their lives spent doing a course that they drop out of, where maybe a bit of counselling and guidance could have made a difference.

My concern is that allowing universities to set their own fees means that, in theory, they would no longer need to rely on government funding. That may be a very attractive proposition to future governments, which may start to see Commonwealth contributions as a place to make easy savings. The minister made the point to me yesterday that it would still need to get through the parliament; but who knows what may happen in years to come? There may even be bipartisan consensus on that—dare I say, not while Senator Carr is in this parliament!


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