Senator GEORGE CAMPBELL (5:45 PM) —While the Vocational Education and Training Funding Amendment Bill 2000 aims to increase funding for vocational education and training to meet CPI increases, that is insignificant compared with the pressures on the VET system and taking account of its future needs. The VET system should be at the centre of Australia's innovation and knowledge economy. Investing in skills and training gives us the ability to compete in the global economy. If Australia wants to be a skilled nation, it has to increase expenditure on vocational education and training. A significant funding increase to the VET system would be a key way of fostering the formation of a knowledge-innovation economy, which is the highroad to better economic development.

This government has clearly ignored the importance of developing our knowledge and skills base. The projected funding increase for 2000 of $13.063 million is concerned only with addressing price adjustments. In real terms, this freezes Commonwealth general funding support at the 1998 level for the fourth year in a row. But, in this day and age, the last thing we should be doing is running down our skills base by freezing funding. Don't forget also that this government has already sliced an estimated $240 million off VET funding since coming to office in 1996. Moreover, it has cut the former Labor government's commitment to provide $70 million per annum for the growth of the VET system. When you consider that there is now increasing demand for vocational education and training, the system, combined with this funding freeze, is at breaking strain. In 1999,1.8 million people participated in the VET system—a 7.3 per cent increase since 1998 and an increase of 29.4 per cent since 1995. Capped funding and the increased demand for vocational and education training leave the system cash strapped, with the quality of service falling as the system stretches itself to meet demand. All in all, there is not much in this bill for the VET system. In fact, it shows a continual failure by this government to recognise the importance of skills and training to Australia's future social and economic prosperity.

There is a close link between investment in education and training and research and development and the capacity for firms, individuals and the economy as a whole to adapt to take advantage of growth opportunities. The VET system should be a central component of this strategy. It is a key training system for our manufacturing and services sectors, which are essential drivers of the economy. Yet the funding freeze in the VET system undermines our ability to adequately grow the manufacturing and services sectors as part of a growth strategy in the global economy. It is indicative of this government's failure to adequately fund investment in education and training and, for that matter, research and development.

Some figures highlight this government's poor investment in knowledge and training. Our investment in knowledge is, on all counts, below the OECD average. Public expenditure on education is 4.3 per cent compared with the OECD average of 4.6 per cent. Our research and development spending is half that of the OECD average, while software expenditure is 6.7 per cent compared with the OECD average of 7.9 per cent. The effective funding freeze in this VET bill, together with our wider underinvestment in education and research, is significant. Simply put, this underinvestment in knowledge based activities is fundamentally linked to a decline in manufacturing as well as a constraint on other sectors such as IT, communications and key service industries. Australia's underinvestment in core assets of the knowledge economy has widened to around one to two per cent of GDP—well in excess of $7 billion. If left to grow, this knowledge deficit will widen to around $135 billion in terms of education and innovation spending.

All of this undermines our ability to compete, and the results of this are now starting to show up in our trade performance. There is now a widening intellectual trade imbalance. For example, IT&T is the fastest growing area of world trade, yet Australia imports IT&T products and services at twice the rate of exports. An efficient, well-funded VET system is an essential part of solving this imbalance. Australia's trade deficit on IT&T has increased by $3 billion under the coalition, from $6.7 billion to $9 billion in 1998-99. The deficit on IT&T is predicted to triple to $28.7 billion by 2010-11. By undermining the VET system's funding, this government is undermining our ability to compete, grow and adjust. This is not a satisfactory situation.

The government claim to support vocational education and training. They say that it is a good thing for employment and the economy more generally, which is true, and no-one would disagree with that. Listening to Minister Kemp, you would really think that the coalition believed in the virtues of vocational education and training. The following is a quote from a speech Minister Kemp made in July this year to the ANTA conference in Melbourne:

They are fine words indeed, but they do not have a scrap of serious commitment to the VET system in them. If there were, Minister Kemp would be drastically increasing the funding and extending the agreement from one year to three years. When we consider the funding freeze the VET sector has been placed under since the government came to power, we begin to realise that the VET system is just not being given its due respect. They support VET and they support training and apprenticeships, but they will not fund them. The other false claim the government make in relation to the VET bill is that it improves the quality of the VET system. They claim this by arguing that their so-called growth through efficiencies measure is improving the standard of courses and training. But in reality, with an increased demand for courses and a funding freeze, the quality of VET courses is only going to decline further.

I will expand briefly on the problems with the so-called growth through efficiencies funding arrangement. The growth through efficiencies funding model is a cynical attempt by the coalition to shirk its funding responsibilities and shift them to the state governments. Rather than make up its share of the funding, the government demanded that the states accommodate the growing numbers of VET students through efficiency gains. While some efficiencies may have been achieved, the Senate Employment, Workplace Relations, Small Business and Education References Committee inquiry into vocational education and training found that funding cuts had reduced the quality of training, particularly as efficiency gains quickly reached their limit with little slack to make up the funding shortfall.

In reality, most of the efficiencies have been gained at the expense of service quality, especially in the TAFE system. Most state governments—both Labor and coalition—testified that their VET systems have been cut to the bone. The Victorian government's submission states:

Even ANTA, who generally support their minister to the hilt, have been forced to admit:

Not only have this government frozen funding, they have also aggravated the situation by turning around and aggressively promoting apprenticeships and traineeships. Under the funding arrangement, the state governments are forced to divert further funds to pay for New Apprenticeships or trainee courses. So long as the states continue to treat a new entrant as an entitlement, the Commonwealth promoted growth of New Apprenticeships calls on their VET budget outside their control. This means that state governments are forced by the federal minister's deviousness to divert resources from the public TAFE system.

Another key facet of achieving a higher national skills and knowledge base is that everyone has access to education and training. A nation is only as rich as its knowledge base. The vocational education and training system is providing training to a significant number of people from disadvantaged groups and backgrounds who need equal access to well-funded education. A Sydney Morning Herald article of 15 August 2000 highlighted the fact that a disproportionate number of students from disadvantaged areas were taking up VET, particularly in secondary schools. The survey conducted by the Australian Council of Education Research found that the take-up rate is higher among students who live in country areas. The federal government cannot ignore these trends towards VET as a means of accessing further education and training to boost employment and hence alleviate disadvantage. Therefore, a funding arrangement that does not recognise growth in numbers of recipients or the loss of revenue associated with subsidising services is unacceptable and will lead only to a diminution of standards.

A report by the House of Representatives Standing Committee on Employment, Education and Training entitled Today's training. Tomorrow's Skills, which was released in July 1998, recommended at point 6.2:

In its reply, the government stated that it did not support the recommendation. This report looked more specifically at TAFE as a VET service provider, and it highlights again the need for an adequate funding structure that is commensurate with growth and demand for services rather than price movements. The coalition is not interested in measuring the success of the system on the basis of criteria such as the number of people from disadvantaged groups that it educates. It is interested only in reducing unit costs; it could not care whom these funding cuts affect. The New South Wales government's submission to the Senate VET inquiry states:

The coalition cares only about penny pinching, and this undermines an important equity role performed by the VET system.

In conclusion, I recommend to the Senate Labor's amendment that seeks to support the increased growth of the VET system and point to the damage done by this government and its minister to the vocational education and training system. We should be pursuing policies that help us to become a highly skilled nation, and increased expenditure on the VET system is an essential part of that approach. Such an approach should include: increased investment by firms and by government in education, vocational training and, equally important, in research and development; progressively increased investment in education and training qualifications, particularly in computer literacy, until we are comparable with leading economies; and giving existing and new workers the opportunity to acquire new skills—particularly computer skills—and qualifications in the new economy.

That is the cornerstone of providing the building blocks for this country to participate effectively in the global economy as a diversified economy with a base in manufacturing and services and in other areas of growth throughout the world. We talk about the importance of being able to participate in the global economy, but we will not be able to achieve that aim unless we invest in building, developing and delivering core skills to the people in our community who want them and grant them free and easy access to those opportunities.