The Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparent Higher Education System) Bill 2017 gives effect to decisions announced in the budget that reform the ways in which the Australian government supports higher education.
It will support the Australian government's goal for a stronger, more sustainable and student-focused system that preserves and expands access to education while achieving savings that are an essential contribution to budget repair.
In the lead up to this year's budget the Prime Minister said: … we call on the other parties … to support us in bringing the budget back into balance. It is a responsibility that weighs heavily on the shoulders of every single member of the house and the Senate …
The 2017-18 budget contains a number of strategic decisions based on careful consideration. For higher education, the budget story begins with the reversal of all remaining measures from the 2014-15 reforms.
The road to reform in Australia's higher education system in recent years has been a bumpy one. The 2014-15 budget reforms were ambitious and they were controversial. Some measures have been implemented while others have been abandoned.
As we promised one year ago, in last year's budget, we have consulted broadly on a package of higher education reforms. The ambitions we set were that those reforms be fair, that they drive quality and excellence, and that they ensure students have choice and opportunities to succeed. We released a policy options paper, Driving innovation, fairness and excellence in Australian higher education, which openly, prior to the last federal election, outlined a range of possible areas for reform and action.
We listened to the debate that followed and now we are acting.
Today, we begin with a clean slate. The first challenge is to ensure our system can respond to the impact of the tremendous expansion in student numbers. Over the last quarter of a century domestic higher education student numbers grew at more than three times the rate of the population as a whole—from 420,000 in 1989 to over a million by 2015. That is around 150 per cent growth.
This growth has imposed significant costs on taxpayers. Since 2009 student funding by the taxpayer has increased by 71 per cent, twice the rate of growth we have had across the Australian economy. The astounding thirst for education has been enabled by the demand driven system in recent years. But it is driven by the reality that a post-school qualification remains one of the best investments an individual can make. Graduates enjoy consistently higher employment and incomes than those who only complete schooling.
Even so, today's graduates need more than just the piece of paper that goes with a tertiary qualification. They need to build the habits that you need to succeed in a workplace and they need to gain the technical skills demanded by a changing economy.
As more people pursue tertiary studies our concept of what qualifications mean has had to evolve. On the supply side, our higher education system is exceedingly successful and has a first-rate reputation both here and overseas. Tertiary education now spans a competitive market where providers are more numerous, more diverse and more commercially oriented than ever before. Looking abroad, education is one of our most successful exports and a major source of income for our universities. In 2016 education export income reached its highest level ever, at $21.8 billion. It is through the skills and insights provided by our current and future labour force that we will prosper in an uncertain global economic and political climate and take advantage of our proximity to the world's biggest and fastest growing economies.
The options paper canvassed scope for reform, with a genuine desire to hear from others how we should tackle the challenges facing our tertiary education system. Because, frankly, we are all in this together.
We are all stakeholders of our education system in one way or another—as former, current or future students; as parents; as taxpayers; as educators; as administrators, providers and, ultimately, employers in businesses or service providers in every corner of Australia. The sector and its clients responded wholeheartedly. We received over 1,200 submissions to the consultation process from higher education institutions, peak bodies, representative bodies from industry and professions, and individuals.
Informed by both public and targeted consultation carried out over many months, this bill contains an innovative, balanced and above all an achievable set of reforms that can position the sector for the future. Schedule 1 of the bill rebalances the costs of higher education between the government and students by making a relatively modest adjustment to the relative shares of taxpayer and student contributions to the costs of courses. There is no fee deregulation. There will be no $100,000 degrees. Let us be absolutely clear about that. All tuition amounts are capped for Commonwealth supported students, as they have always been.
However, it is reasonable that students bear a marginally greater share of the costs of their tuition. After all, it is they who will directly benefit from gaining qualifications through better job prospects and higher earnings over their lifetime. Maximum student contribution amounts will increase by 1.8 per cent per year for four years—cumulatively a 7.5 per cent increase by 2021. Commonwealth contribution amounts will be reduced by the same amount in each of those years. In addition, grants paid under the Commonwealth Grant Scheme will be subject to a modest efficiency dividend of 2.5 per cent per year in 2018 and 2019.
On 1 May, the government released a report on university costs and revenues prepared by Deloitte Access Economics titled Cost of delivery of higher education. The government thanks the 17 contributing universities for their participation in and cooperation with this research. Ongoing participation in this data collection will be embedded in future funding—more on this later. The report shows that the cost for universities to deliver bachelor level courses increased by 9.5 per cent between 2010 and 2015.
Over the same period funding for university students increased by 15 per cent. Universities have benefited financially by enrolling increasing numbers of students through the demand‑driven system. There are efficiencies that have been gained from the scale of that growth. There are also areas that need additional support. Veterinary studies and dental studies are two fields of education whose costs of delivery are unavoidably high.
This bill provides for additional per student loading for these disciplines, on the same basis as the existing medical student loading. The demand-driven system for bachelor degrees at public universities is working and remains unchanged.
Rather than place caps on bachelor-level places as some have suggested over the last year, schedule 2 of the bill contains major reforms to improve student choice in courses that complement bachelor degrees—enabling, sub-bachelor and postgraduate courses. Today's school leavers are investing two, three, four or more years of their life into furthering their education. In most cases they will graduate with a taxpayer-funded loan to repay. Students need to be confident they are getting a quality education that will allow them to get a job and succeed in life. We all saw what happened with the VET FEE-HELP scheme that was poorly designed and poorly implemented. It was Australian taxpayers and exploited students who had to carry the can for that debacle.
This bill puts higher education students in a stronger position to realise their aspirations and turn them into reality, without running the same risks. A new system for the allocation of places for enabling courses will be introduced. These courses can be a life-changing stepping stone for students who need to bridge a skills gap before they commence university. All higher education providers will be able to bid for enabling places.
A more rigorous standard of academic preparation will be required for taxpayer-funded enabling courses. Providers will now also be able to levy a student contribution amount for enabling courses, ensuring that students enrolling in these courses are committed to their studies.
The amount is fixed and proportionate, at $3,271 in 2018 for an equivalent of one year's full-time study; most enabling courses take much less time than this. Eligible students in enabling courses will be able to borrow their contribution amount through the Higher Education Loan Program and will continue to face no up-front fees.
The current loading applied to enabling places will be removed. From 2018, approved sub-bachelor courses—diplomas, advanced diplomas and associate degrees—will become demand driven at public universities. This move is to assist students for whom a bachelor degree may not be the best pathway.
These Commonwealth supported places will be reserved for students who do not already have a degree, ensuring that places are targeted to those who need them. To be approved, sub-bachelor courses must articulate into related bachelor degrees and have been developed with a focus on industry needs.
These requirements will ensure the extension of the demand driven system is sustainable and adds value to the higher education options available to students. At the postgraduate level, the bill introduces innovation in the allocation of non-research postgraduate places, meeting a longstanding need for an up-to-date and more student centred approach. From 2019, postgraduate Commonwealth supported places will be allocated directly to students, who will then exercise choice in their provider.
Higher education providers will in effect be competing for the most promising postgraduate coursework students. This will not affect the allocation of postgraduate medical Commonwealth supported places, an issue that this government is methodically working through in a separate process involving the Department of Education and Training and the Department of Health.
Further, from 1 January 2018, schedule 2 of the bill introduces the ability for providers to receive taxpayer contributions for units of work experience that count towards a Commonwealth supported qualification. Higher education funding will now incentivise greater links to industry.
Transparency is a major theme of these reforms. From 2018, the government is introducing a performance based element to the Commonwealth Grant Scheme, worth 7.5 per cent of total CGS cluster funding—around $500 million annually. For the first year, 2018, providers will be required to participate in the reform of admissions information and cost of teaching and research transparency initiatives that the government has announced.
For 2019 and beyond, providers will be required to meet the above conditions, but their CGS funding will also be contingent on performance against key institutional performance metrics. The formula to determine this will be developed in close consultation with the sector over the coming year.
Our performance payments will give taxpayers and public policymakers confidence that demand driven enrolments are coupled with accountability that ensures high-quality admissions practices, support for completion and a focus on graduate employment outcomes. Australia's HELP scheme remains one of the most successful public policy innovations ever. Twenty-five years on, it is still the best and most generous—and effectively interest free—loan that you can get. But its success has meant that the value of outstanding HELP debt has risen sharply in recent years.
Outstanding loans are worth around $50 billion. Unless we act now, a quarter of new student loans will never likely be repaid. To address this, schedule 3 of the bill introduces further measures to improve the sustainability of the Higher Education Loan Program.
This government has already introduced changes to HELP that include lowering the minimum repayment threshold from 2018-19, removing the 10 per cent up-front payment discount for HECS-HELP and the five per cent voluntary repayment bonus, and removing the HECS-HELP benefit. Australia's HELP repayment thresholds are high compared with other income-contingent student loan schemes. Borrowers under the New Zealand student loan scheme repay 12c in the dollar on any income earned above the equivalent of around A$17,500 a year. Borrowers in England repay nine per cent of any income earned above the equivalent of around A$36,000.
The time has come to bring thresholds down to more realistic levels. From 2018-19, the non-repayment threshold will be lowered further to a level that will bring around 180,000 additional borrowers into the repayment stream.
The new minimum income will be set at $42,000 but will be accompanied with a new and lower initial repayment rate of just one per cent. That is about $8 a week. A further 18 subsequent thresholds and repayment rates will step up in small increments to reduce income clustering and to make repayment increases smoother and less noticeable as earnings rise. There are new repayment thresholds for high-income earners. Now, the highest income earners will pay up to 10 per cent of their repayment income towards their HELP debt. The current maximum is eight.
The thresholds have also been rising relative to earnings. Relatively fewer people are now making repayments than in the past. From now on, the minimum and all subsequent thresholds will be indexed using the consumer price index. This will ensure repayment requirements are adjusted in line with cost of living, and streamline indexation factors used throughout the act.
The bill replaces Commonwealth supported places with HELP student loans for most Australian permanent residents and most New Zealand citizens. Any students already enrolled in a Commonwealth supported place will have their eligibility preserved for sufficient time to complete their course.
This means that Australian permanent residents and New Zealand citizens will no longer have to pay up-front for a course that their Australian peers can defer through a student loan. Up-front payment is a barrier for many students and their families, particularly if they are still establishing themselves here.
This is only possible because of the changes we introduced which commence this year and allow us to recover HELP debt from people who have moved overseas. Australian citizens and permanent humanitarian visa holders will remain eligible for both Commonwealth supported places and HELP loans. So will the special cohort of New Zealanders who arrived here as children and meet the current long-term residency requirements introduced by this government in 2016.
Schedule 4 of the bill ensures that the highly regarded Higher Education Participation and Partnerships Program (HEPPP) is better targeted and is enshrined in legislation with a new, demand-driven loading of $985 per low-SES student.
In addition, annual funding amounts of $13.3 million in performance funding and $9.5 million for the National Priorities Pool will be guaranteed into the future. Finally, schedule 5 of the bill makes a minor amendment to the definition of higher education award to limit it to awards offered or conferred by higher education providers under the Australian qualifications framework. It also updates the names of two institutions, the University of Technology Sydney and the University of Divinity, so that the name of these providers in the act matches their current legal entities.
The measures in this bill were designed with fairness, transparency and sustainability at their core. They were informed by a broad-ranging consultation process where every stakeholder had an opportunity to contribute ideas. No student need pay one cent up-front for their higher education. Students will no longer face the prospect of fee deregulation and universities will not face a 20 per cent cut to their funding.
Where there is a financial impact on stakeholders it will be achieved in a way that is gradual, fair and appropriate. The bill paves the way for much more student choice—in course and course provider. It supports the continuation of the best features of the current higher education system, underpins a vibrant education export industry, supports student career aspirations and ensures industry has a skilled workforce.
This bill brings to a close a thorough period of consultation and careful redesign of support for higher education. More importantly, it brings certainty to a sector that is unanimous about the need for change and that has been left waiting long enough.
These reforms ensure our high quality higher education system can grow while meeting the global challenges it will increasingly face. It ensures it is fair for students who will continue to be able to access higher education irrespective of their background or financial means.
They will have more choices and the Turnbull government will ensure greater transparency so that the focus of our higher education system is where it should be—on our students. Taxpayers, whose support means no-one must pay course fees up-front, will get a better deal knowing that the Turnbull government is looking after them, as it is looking after all Australians, fairly.
I commend the bill.