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Tuesday, 12 September 2017
Page: 60

Mr LEESER (Berowra) (17:18): This Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparent Higher Education System) Bill 2017 is fundamentally about one thing—that is, the sustainability of the higher education system. There has been a wonderful and very important expansion of the higher education system under the demand-driven system since 2009 but it has never been on a sustainable basis. It is very important that universities, that students and that the whole higher education system have the certainty and stability that only funding sustainability can provide.

Now the mythmakers and the luvvies would have you believe that nothing happened in higher education until 1972 with the election of the 'Sun King', Gough Whitlam, but that's not true. The greatest expansion in higher education occurred under the prime ministership of Sir Robert Menzies.

Sir Robert Menzies' own story is worthwhile recounting in this regard. Menzies was a country boy who grew up in a one-horse town, went to a one-teacher primary school and won scholarships to high school and then scholarships to university. It was those scholarships and that opportunity to go to university which transformed his life. It allowed him to lead his profession, to lead his party and to lead his nation for a record 16 years. He was an extraordinary prime minister and an extraordinary leader in education. He wanted to give other people the same opportunity that he had had in terms of higher education. That's why he sought to expand universities to the extent that he did. In 1957, he said:

It is not yet adequately understood that a university education is not, and certainly should not be, the prerequisite of a privileged few…We must, on a broad basis, become a more and more educated democracy if we are to raise our spiritual, intellectual and material living standards.

Expanding educational opportunity is actually part of the DNA of the Liberal Party. Indeed, the demand driven system which underpins the growth of higher education was originally a Liberal Party idea. It first appeared in the policy framework in 1992 as part of the first Fightback! policy package. As that package said:

Freedom for institutions, academics and students requires a decisive move away from a centrally administered system to one based on a greatly strengthened student market, in which students can choose their university according to their own judgements and institutions have the flexibility to respond to these choices…Institutions will be free to offer places as they chose in any course with limited exceptions.

That was the first appearance of the demand-driven system.

In October 1999, the then education minister David Kemp proposed a reform to cabinet, and part of this reform was the demand-driven system. As his submission said:

… the package delivers a universal entitlement to higher education for all who can meet entry qualifications. Students will have greater choice about where they study, subject only to meeting admissions criteria, and the range of courses available will be wider and more appropriate as institutions are freed up to respond more directly to demand for particular courses and in particular locations.

Menzies realised that any growth in higher education had to be sustainable growth. That's why, in 1965, in response to some calls for further funding by academics, he said:

If I have one complaint that I can make about my academic friends, it is that some of them - not all of them but some of them - appear to think that there is no limit to what can be produced financially. I've even known one or two like that at Canberra. The sky is the limit, they think. The sky isn't the limit. Considerable financial power doesn't mean inexhaustible financial resources and that is not to be forgotten…the task of a Commonwealth Government in economic and financial policy is to preserve a good economic climate in which growth can proceed from a stable foundation…

It's not just Menzies' academic friends that didn't understand that things needed to be paid for; it's Menzies' friends on the other side of the House that don't understand that. Just like the NDIS and just like school funding, it was the Labor Party that expanded the demand driven system, and that's a good thing, but yet again they've started a system and they haven't made it a sustainable system, because they haven't provided an adequate and sustainable funding source for it.

Towards the end of the last Labor government, they realised that they actually needed to provide a sustainable basis for this. That's why, in government at the end of the Labor years, they proposed their own efficiency dividend of 3.25 per cent. The then Prime Minister Gillard, on 16 April 2013, said:

The number of places has grown, but funding has also gone up per student place. Money to universities is still going to grow. We've got universities on a growth path. What we are asking them to do is for one year to accept a two per cent efficiency dividend, and in the second year a 1.25 per cent efficiency dividend. That means their money would still grow, it just wouldn't grow as fast as they'd obviously wanted.

The former Prime Minister Julia Gillard has demonstrated herself to be more economically responsible than those opposite who are opposed to this bill and who do not want to see this particular arrangement, which has provided extraordinary opportunities to students, to be held on a sustainable basis. It's important to remind people that the budget is still in deficit. Every year we're repaying $17 billion of debt. This is despite the fact that we've passed $100 billion worth of budget repair.

What we need to do is to ensure that the opportunity that's provided in the demand-driven system continues, and that people continue to have the opportunity to go to university. Today, 32 per cent of Australians have a bachelor degree or higher, and that is a great result. Our per student funding from all sources is 23 per cent higher than the OECD average, and we should be proud of that. But since 2009, the taxpayer funding for teaching and learning has increased by 71 per cent, that's twice the growth rate of the economy as a whole, and the introduction of the demand-driven system has seen a massive expansion in the number of students going to university, and that's a very good thing. For instance, in 2016 there were 720,970 domestic undergraduate students, and that's compared to 553,083 in 2009. That's a very, very good result. But you can't expand the system if you can't pay for the system. Over time, HELP has also ballooned. The fair value of student loans has increased from $12.5 billion to $36.8 billion, and is expected to increase further to $59.7 billion by 2019-20. The total outstanding student debt underwritten by taxpayers now stands at $50 billion, with a quarter of that—that's 25 per cent—not expected to be repaid. As I said, it's not responsible or fair to establish a system and then not provide for its long-term sustainability.

What this legislation proposes to do is to have an increase in student contributions in relation to their higher education. As we know, students who go to university, who have a higher education experience, are more likely to earn larger salaries and have better jobs over the course of their careers. Over their lifetimes they will earn, on average, between $700,000 and $900,000 more than a person who hasn't gone to university; therefore, it's fair that they should make a bit more of a contribution than they are currently doing. This doesn't mean that they would be contributing more than half—the Commonwealth is still contributing up to half—but that they should contribute a little bit more.

The legislation seeks to increase the maximum student contribution on Commonwealth-supported places, which are otherwise subsidised by the government. The increase in contributions will be phased in from 2018 to 2021, with a 1.8 per cent increase each year from 2018 and culminating to a 7.5 per cent increase in 2021. This will be offset by a reduction in taxpayer funding. These reforms will rebalance the contributions made by taxpayers and students to the cost of their higher education. After the changes have been implemented, taxpayers will remain the majority funder of higher education, providing on average 54 per cent of funding for the costs of teaching and learning.

As I said earlier, we know that one-quarter of the money in the HELP system isn't being repaid, and we need to do something to recoup some of that money. So the legislation is setting the minimum repayment threshold at $42,000, with a repayment rate beginning at one per cent of an individual's repayment income, which is much lower than the current rate of four per cent, which cuts in at a threshold of $54,869. To put this into perspective for a graduate teacher or a graduate nurse, for instance, a graduate teacher on a median full-time salary of $62,900 might currently expect to repay something in the order of $2,830 a year and a graduate nurse earning $58,400 would be expected to repay $2,336 per year. Importantly, from 1 July 2019 the repayment threshold, including the minimum repayment income, will be indexed using the CPI. This will maintain repayment value thresholds in real terms. Indexation by CPI will slow the growth of repayment thresholds and ensure they remain appropriate when compared to an individual's capacity to pay. The other advantage of the HELP reforms is that the proportion of debt not expected to be repaid, as the repayment threshold cuts in lower, reduces from 25 per cent to 18 per cent by 2020-21.

Finally, while eligibility for student loans will be extended to most Australian permanent residents and most New Zealand citizens, these students will no longer have access to Commonwealth subsidies, and this preserves a range of special cohorts, including some New Zealand visa holders who arrived in Australia as children, those permanent residents and New Zealanders who have already commenced on a course of study and Australian humanitarian visa holders.

I want to have a look at the efficiency dividend, which the member for Brand spoke about earlier. This legislation will require subsidies provided under the Commonwealth Grant Scheme to be subjected to a 2½ per cent efficiency dividend in both 2018 and 2019. It is to be remembered that, as I said earlier in my remarks, when Labor was in government they proposed their own efficiency dividend of 3.25 per cent. The Deloitte cost recovery report, undertaken in 2016, showed that universities spent approximately 85 per cent of their total funding for bachelor-level courses in 2015 on teaching and learning compared to the 2011 base funding review, which found that 94 per cent of base funding for bachelor-level courses was spent on teaching and learning. These findings suggest that it's actually reasonable to expect that some of these efficiencies should be shared with the government.

Effectively, the cost per student for teaching and learning have increased by 9.5 per cent since 2010, while revenue per student has risen by 15 per cent over that time—so a larger revenue and, while there were rising costs, costs have not risen as much as revenue. This efficiency dividend equates to an average of 2.8 per cent of base funding for teaching and research. It's an essential contribution from the revenue benefits of the demand-driven funding system, which have not just been beneficial to individual students but have also been beneficial to universities and the university system as universities have been able to increase their resources and increase their offerings as a result of the extra funding that's come their way.

Some of the most important measures in the bill actually relate to less advantaged students, whose geography or background might disadvantage them in attending university. I think the most important of these is the legislating of the HEPPP program. The HEPPP program is the major equity program. It has never been legislated, and it has often been a source, on both sides, of funding cuts that have occurred from time to time. This government is securing HEPPP by entrenching it in legislation. It's providing a loading of $985 per low-SES student. That will allow universities to provide them with a consistent level of support. Additionally, with performance funding of over $13 million a year, it will provide universities with incentives to ensure that disadvantaged students actually achieve success at university.

These provisions provide funding certainty to universities so that the benefits to low-SES students of accessing higher education are maximised. It's been a bipartisan goal since the Menzies era to increase the number of low-SES students attending university and the number of low-SES students participating in higher education. Yet, despite all of the expansion, on a per capita basis the greatest period in which low-SES students actually participated in the higher education system was the Menzies era. So it's very important that the HEPPP system is maintained on a legislatively secure basis.

We want to collaborate to provide the most effective education experience for all disadvantaged students. That's why we're creating our national priorities pool to support projects that research and trial innovative ideas for the more effective implementation of HEPPP. This will ensure that universities will engage in the long-term planning needed to guarantee accessibility. Such planning and collaboration is absolutely essential if we are to guarantee disadvantaged students a valuable experience of further education. That is very important.

There will also be supports for regional higher education, improving opportunities for students from rural and regional areas to study in regional hubs, for those who can't get to their local regional university, and also for scholarships, particularly directed at STEM courses, of up to $18,000 a year for programs from certificate IV right the way up to PhD. There are also important elements of the package relating to enabling courses, relating to the expansion of the demand-driven system of Commonwealth supported places in approved sub-bachelor courses. Being a sub-bachelor student is often a great pathway in as part of the second-chance university system into the sector. The expansion is a very good thing and will provide further opportunity to more Australians.

In conclusion, is it very important that the demand-driven system is maintained so that it gives opportunities to so many people, but we need to ensure that it is maintained on a sustainable basis.