The restoration budget

12 years of Coalition rule have produced holes and thanks to continued record tax takings the government can cement itself in as the biggest in the country’s history. And it needs to be that to be able to plug the holes that have emerged in the interim.

The moves on higher education are welcome but don’t get us near the share of GDP spend that we had in 1996 (2 percent then and projected to be 1.6 percent soon) and so we lag other countries in this regard. This is despite its critical role in productivity, competitiveness and innovation.

The issue with higher education has been how to convince Australians to spend more on it — through government or themselves. We have the best system in the world to allow individuals to fund that education (HECS) and yet for years it has been hampered by regulations that constrained Universities in their ability to compete, specialise, improve and make that case to the Australian people. Some of the moves last night will allow that but even the Endowment Fund setting up would seem to have rules and a committee to allocated even the funds Universities might attract themselves back to them. It could work well but why does a government with a supposed market philosophy still maintain a soviet system?

One aspect of this is, of course, the requirement to have these funds managed by the Future Fund. The Treasurer cited ‘economies of scale.’ Well, if that is the case, why not allow all Australians to put their super in the Future Fund. It either will perform better than private funds or it won’t. But in its current structure, it won’t allow Universities to balance current and future investments. That will be managed centrally as it always has. And even if that Board managing it is independent, who is to say that the government of the day, watching the fund’s performance won’t adjust its recurrent contributions to Universities?

Fortunately, the current changes will go a long way towards letting Universities explore different models. The Melbourne Model may work much better in this. With degrees such as law and medicine set to cost over a quarter of a million, parents will think twice about letting 17 year olds make that choice too early. It is a much better investment on a 20 year old who knows what they want to do.

The other hole being plugged is that continued insanity on child care. Anyone who has attempted to navigate this system (I have) knows that it is one of the most stupid subsidy schemes ever. It is not that funding child care is a bad idea — that is OK. It is the way the 30 percent rebate is handed out. It can take years — it is a rewait not a rebate. So what is being done here? Let’s just do a once off so that we can get a big pot in before the election. That way the books are only cooked for one year and what is more the big sum that should have been paid a year ago is combined with the sum that should be paid now anyway to look like a big hit just before the election. My belief is that anyone who has had to sign up for this system will see right through that. Also, I am not confident that claiming the current rebate will prove so easy. We will see.

So there is nothing in this budget to move forward. Everything is clawing back. Then again, in an election year, we should expect to see the forward stuff closer to the election.

[This post appeared in Crikey on 10th May, 2007]

8 thoughts on “The restoration budget”

  1. The removal of the cap on full-fee domestic places seems like a pretty huge change and also one that seems strange when it’s included in a budget, rather than a Higher Ed policy statement. Or am I missing something?


  2. How would you better allocate funds for capital works in public universities? Doesn’t competitive bidding make some sense?


  3. Is it going to be competitive bidding? If so, how? Wouldn’t it be better if Universities were able to manage their own capital needs. This process prevents them from ‘saving.’


  4. Joshua
    The dissapointing thing which I think you have missed in your commentary is the fact that our universities for the most part are not world class – although Melbourne may well become the exception with its new model – and as such Australians are unwilling to pay anything but a nominal fee for their education.

    It is for this reason that so many Australians (you and I included)choose to do our graduate work outside of Australia and predominantly in the US.

    And what is the attraction that draws people to the US despite its higher fees? In short it is the fact that the US University Sector provides by and large the great bulk of the world’s premier academic institutions, teachers and scholars. And while the fees for higher education in the US can be high (although they do range considerably from State Schools to the Ivy League)domestically they have one of the highest access rates in the world because people are willing to pay for a quality education. Alumni of US Schools are usually so pleased with the eductaion they recieved that they donate generously to their alma mata when they have left and are in succesful careers.

    Over time the US has developed a culture of large scale private investment and philanthropy in US Universities – which is the real key to unlocking inovation and productivity in our economy and rejuvenating our universities.


  5. Joshua,

    The system you are referring to where universities make there own capital decisions is close to a private not public set of universities.

    In a public systen tendering doesn’t seem bad.

    Rob Young, EWe all have incentives to laud the institutions that train us. Most of us are aware of such biases.

    Your superficial generalisations/observations on the Australian universities display an unattractive cultural cringe.


  6. Joshua – dissapointing that you would seeminlgly take my comments so personally and respond in such a way. That said let me assure you that I am a very proud Australian but nationality should never be allowed to hide objective reviews of alternate policies, systems and or programs in any field. While my comments in a 100 word blog will always be general this should not take away from the point I am making – which you is that encouraging private investment in universities both through philanthropic activities and by direct user pay (rather than public investment) will actually allow Australian Universities to innovate and become world class. A point that one of your Melbourne University Colleagues – Andrew Norton – has given more than just a trivial review and of which I am sure you are aware.


  7. Rob, I noticed your spelling was a bit off but your powers of observation are not that good either. Perhaps a refresher course at a good Aussi university?


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