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Education and Employment Legislation Committee

ROBINSON, Ms Belinda, Chief Executive, Universities Australia

TEECE, Mr Mike, Policy Director, Academic, Universities Australia

CHAIR: I now welcome Universities Australia. I understand that information on parliamentary privilege and the protection of witnesses has been provided to you. I now invite you to make a short opening statement. At the conclusion of your remarks, I will invite members of the committee to put questions to you.

Ms Robinson : Thank you for inviting UA to appear before the committee today to elaborate on our submission. Universities Australia is the peak body representing Australia's 39 comprehensive universities, including two not-for-profit private universities. Many of our members and other groups of universities have provided individual submissions to the committee, and you have already heard from a number of them. Our comments will complement the views they have put forward.

UA's core business is working in partnership with government and, in fact, the parliament more broadly to ensure that the policy, regulatory and fiscal framework supports a strong, vibrant, responsive, innovative and internationally competitive university system—a system that serves its students and the nation. We believe that working in partnership with the parliament and with the government is the way to achieve optimal outcomes in the interests of the nation. We have, on many, many issues, worked very well with both major parties within government on a range of issues to achieve really positive outcomes.

All universities operate on a not-for-profit basis. Every dollar that comes into a university is invested in the University. Universities don't generate dividends nor do they exist as vehicles for generating financial wealth for shareholders. As Professor Ian Jacobs, Vice Chancellor of the University of New South Wales, observed last week, universities are servants of their communities; they exist to deliver public goods, most directly in the form of higher education and research. Through this, they contribute to social cohesion, economic advancement, industrial and economic diversification, regional development, business innovation, and the solutions to some of our most confounding problems.

Underpinning every successful nation is a strong higher education and research system. Australia's university system is one of the best in the world. It educates more than 1.3 million students in each year, employs more than 120,000 staff and supports a further 40,000 jobs. The sector contributes more than $2 billion each year to Australia's regional economies, and sustains in excess of 14,000 regional jobs. It delivers three quarters of the value, currently at around $22.4 billion, of Australia's highly successful international education sector, and is responsible for the high esteem in which Australia is held as a destination of choice for international students. But higher education is worth more than just dollars.

Against a background of economic and technological change, increasing global competition and a threat of widening disparity in opportunity—including between regional and metropolitan areas—university education is a way to bridge the gaps, shape our future and transform lives. Australia cannot be an innovation nation without strong universities. Without adequate, sustainable and predictable funding, universities cannot open their doors to properly support; provide the quality of education expected by all those with the requisite ability to complete a university education; undertake the world-leading research that saves lives and transforms industries; or assure Australia's successful transition to a very different technology based future where lifelong learning, upskilling and reskilling are the new norms.

Neither this bill nor its 2015 predecessor are policy reforms; they are budget savings measures and should be discussed and debated as such, honestly and transparently. The primary purpose of this bill is not to strengthen the university system, to provide a better experience for students, to drive the national innovation agenda, to put universities on a more sustainable footing or to improve Australia's international competitiveness as a provider of international education; it is to deliver a $2.8 billion saving to the federal budget. One component of the bill, the efficiency dividend, will reduce total base funding to universities by around $330 million a year by 2021, and that is in 2018 dollars. This is the equivalent of removing one whole university from the system.

When it comes to budget repair, the sector has more than contributed its fair share. Since 2011, universities and their students have contributed almost $4 billion—$3.9 billion—to rein in the federal budget deficit. It is important to note that this $3.9 billion budget repair effort is in addition to $3.7 billion currently held in the Education Investment Fund, the EIF, for university infrastructure. The government has announced that this money will be repurposed and that fund closed.

While the bill contains a number of very positive measures—support for the Higher Education Participation Partnership Program, expanding the demand-driven system to sub-bachelor places, and incentives for more work placements—the majority of UA's members are strongly of the view that these do not outweigh the negative impact the cuts to public investment and the increase in student fees will have on students, research and regional communities. For this reason, the consensus view of the sector is to oppose the passage of the bill.

Much has been said about rivers of gold flowing to universities as a consequence of the introduction of the demand-driven system and the surpluses that universities hold to justify the $2.8 billion cut to the sector. Let's be clear: this increase in public funding has been driven by enrolment growth associated with the introduction of the demand-driven system, a policy initiative supported by both major parties. Far from delivering untold riches to universities, enrolment growth also means expenditure growth, as existing programs, services and infrastructure are expanded to meet the increased load. To claim that the demand-driven system is unaffordable because it has done precisely what it was meant to do—that is, increase participation from disadvantaged groups and increase the number of graduates to meet future labour market projections—is curious to say the least.

Even with the growth in enrolments, it is a fact that, both as a share of government outlays and as a share of GDP, public investment in higher education is falling. Public funding for tertiary education as a proportion of GDP dropped from 1.2 per cent in 1995 to 0.7 per cent. In relation to surpluses, those universities that do post a surplus, and not all do, reinvest these into teaching and research. This reimbursement is lumpy, often nondiscretionary and varies substantially from year to year. To point to surpluses as a rationale for reducing funding is to misunderstand the fundamentals of good governance and sound financial practice. Just under half of all universities are either operating in deficit or are on slim operating margins of less than five per cent. A number of state auditors-general have recently expressed concern in relation to the financial health of some universities. The New South Wales audit office, for example, has at the top of its list of financial risks for universities the 'potential impact of government policy changes'. There is a certain irony in the argument that says that declining university surpluses should be further eroded so that a federal budget surplus might be achieved.

A number of elements of the package—specifically, performance based funding and postgraduate scholarships—require substantially more thought and consultation with the sector to achieve the policy objectives being sought. In relation to performance based funding, the evidence of need is scant. Attrition rates have not changed markedly in recent years, retention is on par with the rest of the developed world, and student satisfaction continues to climb. That said, universities are demonstrably committed to continuous improvement in meeting the needs of their students and will support a scheme that achieves this. However, a punitive approach that disadvantages the very universities that support students who are most in need is not that scheme. A package based on funding cuts and increases in fees will reduce the range, diversity and quality of universities' offerings, driving the system to greater homogeneity as lowest-cost modes of delivery are pursued. The case for how this benefits students is yet to be made. There is no doubt that universities in regional or outer metropolitan areas as well as those institutions that do the heavy lifting on access and equity will be affected most.

In summary, the majority of our Universities Australia members oppose the passage of the legislation in any form, because students will pay more and receive less, it will result in less rather than more diversity as universities pursue lower-cost models, it does not deliver true reform, it will lead to large bureaucracies and administrative costs for government and universities without a commensurate benefit, it will lead to financial difficulties for many institutions, and it will make higher education less accessible. It will cast a pall over the future of non-economically viably courses, campuses and student support services and will likely lead to staff reductions, and it will further increase the level of financial exposure of the sector to international education. Thank you.

Senator JACINTA COLLINS: Just before we came into this session, Ms Robinson and I were talking about the curious figures the department has put forward in the Financial Review today. There seems to be a pattern—and I think Vicki Thomson made this point yesterday—of behaviour by this minister to launch data on a selective, restrictive basis through the media and not make it available for detailed consideration in inquiries such as this. But fortunately I'll have an opportunity to explore that further with the department later. Ms Robinson, can I go back to your point about proportion of GDP? I missed the full detail of that. What year was it at 1.2?

Ms Robinson : It was 1.2 per cent of GDP in 1995 and went to 0.7 per cent in 2013. They are the latest OECD figures. And I should just say that that's despite the sector contributing to around eight per cent of Australia's GDP.

Mr Teece : And despite very significant enrolment growth over that time.

Senator JACINTA COLLINS: Yes. I gather from that and your other comments in your submission that you dispute this notion that the demand-driven system is unsustainable.

Ms Robinson : It depends, I suppose, on what people mean by sustainable. But we should note that while there was a significant increase in enrolments as a consequence of the introduction of the demand-driven system and in the ramp-up to the introduction of the demand-driven system, from 2009 there was very significant growth in enrolments. But what we've seen over the past couple of years is that the growth has really levelled off. So now we're seeing growth increase at even just marginally less than population growth. So, it appears that the unmet demand has been saturated and now we're seeing that the demand-driven system is growing at around or just under population growth. And I'd just point out that that was what the demand-driven system was intended to do.

The key objectives of the demand-driven system were primarily twofold. One was to increase participation by those from underrepresented groups—which it has done, to the tune of about 45,000 people. The second was to make sure that Australia was going to have a sufficient number of graduates to meet projected labour market demand. I think it was the ORPA that projected that we were going to need around 3.8 million more graduates by 2025 to meet the labour market needs of the future. When you do the maths, at the moment we're graduating I think around 300,000. So, we're probably still going to be a little bit short—recognising of course that these are just estimates. Nevertheless, we do know that there is going to be a need with the economic and industrial restructuring that's going on, particularly as a consequence of technological change as we move to a digital economy, that we will need more people with more-advanced skills.

Senator JACINTA COLLINS: Yes, and this again goes back to the popular rhetoric, particularly with the ministers at the moment, about the sustainability of the system. You paint quite well in your opening remarks the historical perspective here, and it all dates back to the audit report when this government first won government, and its desire to achieve $80 billion in cuts across education and health, and higher education as a component of that. They're retreating a little bit from 3.5 down to 2.8 in this current proposal. But, as you've said, it's a budget savings measure, not a reform package, that sees higher education well placed to continue with a demand-driven system and deliver education more universally within Australia.

The sustainability point, though, I come back to, because you've addressed I think in part in your submission the discussion around the investment return from education and the fact that reports such as the audit report and others haven't necessarily factored in those important considerations in terms of driving future growth. It's perhaps more an ideological position, with the government's obvious view on tax relief for business, and the answer is, well, that will drive growth. Well, indeed, so does investment in education. Would you care to elaborate on your submission there?

Ms Robinson : Just on that last point, I suppose one of the rationales for defending the reduction in the corporate tax rate for small business was to maintain the international competitiveness of business. And I guess from our perspective we would say exactly the same thing in relation to higher education and research. We need to fund it properly, not just to maintain the international competitiveness of Australia as a destination of choice for international education but, much more importantly than that, to maintain the international competitiveness of Australia, because of course having properly trained graduates who are equipped with the skills they are going to need in a very uncertain future, together with the products and the services and the industry innovations that came from our research programs, are going to be the absolute key for Australia making a successful transition to a very different future. And in that way really we should be looking at universities perhaps as the insurance policy, particularly in economically and socially volatile and uncertain times. It is universities—through higher education, through research, through innovation—that can help to serve as Australia's insurance policy to maintain its place in the global economy and to maintain the quality of life that Australians enjoy now and expect for the future.

Senator JACINTA COLLINS: On your point about growth in student numbers—and we heard this yesterday as well, a suggestion that it's now essentially plateaued—the government has given us, although they haven't sourced it in their submission, a table of Commonwealth supported students going up to the year 2015. I can't see any reason that we wouldn't be able to see a graph that indicates 2016 or 2017 even. It may not be as well informed as it could be, until after the event, but surely there would be some indicator up to more current times that might demonstrate that plateau. Do you have available to you information that would assist us further there?

Mr Teece : So 2015 is the latest year for which full-year enrolment data are available. There are first-half-year data for 2016 on the department's website which would give a pretty good indication of enrolment trends for 2016. Obviously, there are figures—estimates—going into 2017 and beyond in the budget papers as well as in the department's submission.

Senator JACINTA COLLINS: I didn't see their estimates going into 2017.

Mr Teece : For first-half-year 2016, actual enrolment data are available.

Senator JACINTA COLLINS: Does that demonstrate the plateau?

Mr Teece : We've seen over the last two years that the total number of Commonwealth supported places has grown by a small amount—around two per cent. The number of commencing Commonwealth supported places has actually declined by half a per cent in each of the last two years.

Senator JACINTA COLLINS: So the most recent figures do actually demonstrate the plateau?

Mr Teece : They certainly do, yes.

Ms Robinson : They demonstrate that, over the past 12 months, it's about 1.6 per cent.

Mr Teece : It is 1.6 for all places and then a slight decline in commencing in new places.

Senator JACINTA COLLINS: You mentioned, Ms Robinson, the consensus view of universities on this package. That's a fairly rare occurrence, isn't it?

Ms Robinson : I choose my words carefully—

CHAIR: When did it last happen, Ms Robinson?

Ms Robinson : It happens on a very regular basis, I have to say, in relation to many, many issues. In relation to the budget measures, the last time that happened was in 2014, and that was a consensus view to support—and this is really important to have on the record—an amended bill. The amendments to that bill were: to moderate the 20 per cent cut; to change the proposed real interest rate for HECS-HELP to CPI; to provide structural adjustment for institutions that particularly cater for disadvantaged students; and to provide for a staged and slower introduction of implementation so that we could fine-tune, change, alter that package as we knew more about what the impact of those measures was going to be. I would also point out that that very conditional support for an amended package was in the context of successive governments having demonstrated an unwillingness to provide the level of funding and public investment that was required for universities to deliver the sort of education that was expected by students, by communities, by families.

CHAIR: You're talking about the $6.6 billion cut by the Labor government?

Ms Robinson : I'll just say that we don't have the figures with us, but there had been repeated cuts either mooted, announced or implemented, many of which have in fact been implemented since then. Against that backdrop, the universities have a very strong interest in maintaining the quality of the programs that they deliver. Given that both of the major parties had indicated a reluctance to fund universities properly, there were very few options available to ensure that that quality could be delivered. But I do want to make the very strong point—and it is important for people to be aware—that the Universities Australia consensus position was for that bill to be amended in four key ways, including a very substantial moderation to the proposed 20 per cent cut. That was because, in doing that, that would put downward pressure on any price increases for students.

Senator JACINTA COLLINS: On the price increases for students, what are your main concerns about the impact of the measures in this package?

Ms Robinson : I know you have spoken to Professor Chapman and others, and I have to say that I think he is much better placed to be able to provide advice on that. It is very difficult to know what level of elasticity is provided by the HECS-HELP system and what any changes to the HECS-HELP system would mean in practical terms. However, I do note—and I think it is worth noting—that, at the outset, one of the really fundamental principles of the HECS-HELP system was that students wouldn't repay their loans until their incomes reached a point that reflected a premium that would be achieved by studying at university and gaining a university degree, and that goes to another fundamental principle around fairness and affordability. So I think that it is important to remember what some of those fundamental principles are.

We have had a long-term position that it is absolutely important that we protect HECS-HELP. It is one of the outstanding features of the higher education system in Australia—absolutely outstanding. It is the envy of the rest of the world in many ways. But we do have to ensure that it is sustainable, because if we don't ensure it's sustainable we risk losing it altogether. So we do not object to ongoing consideration of the scheme, provided we do not undermine the policy integrity of the HECS-HELP system and provided we don't undermine the principles of fairness and affordability. It is there to ensure that everyone who has the capability to go to university and to succeed at university can do so, regardless of their financial background.

Mr Teece : Our other concern about the proposed fee increases is that students will be paying more to access places that are more poorly resourced overall.

Senator JACINTA COLLINS: Yes; that is the 'pay more for less' theme.

Mr Teece : Indeed.

Senator JACINTA COLLINS: Going back, though, to the original principles of HECS and your reflection on, essentially, people paying once they had reached that premium level of income: one of the original design features was that there were always going to be disciplines or programs where students would potentially not ever earn the premium that is regarded as attached to some professions—particularly women, who, with a proportion of their professional life possibly spent out of the workforce or working part-time, may not ever get there. I think originally one of the design features, too, was that that burden would not translate to their estate, partly for that reason. Yet now we see stories—and there was a particularly insightful letter that the NTEU gave us yesterday—of the circumstances of some women who are part-time and sole parents with a number of children, and the financial pressures that they are under, even under the existing threshold level, let alone dropping it down to the $42,000. That does seem to cut across the original principles around how HECS should represent the premium that people will earn, particularly when the levels we are looking at potentially come under even the low-income thresholds that apply to other social security measures such as parenting payment.

Ms Robinson : You have heard from the NTEU and you have heard from students—you have heard from a number of people on this issue—and you have heard from Professor Chapman. As I say, I do not think I am really in a position to say whether 42 is the right number, 46 is the right number or 56 is the right number, but of course the lower you bring the threshold down, the more difficult those already experiencing difficult circumstances will find it. But, as I say, I do not think that the elasticity has really been tested. I think some people have argued that, in terms of the income threshold acting as an impediment to study, it is elastic; I'm not sure it has ever got to the point where that has been properly tested. I really should defer to the experts who have done more work on that, and Professor Chapman, obviously, is the preeminent expert in this issue. But I will say that the lower it is brought down, the more difficult it will be.

Senator JACINTA COLLINS: The point, though, that he did not cover, which you have just raised, is the one that I think is helpful, and that is: we need to go back and look at what the original principles were. The thresholds represent the premium you gain by access to a tertiary education, rather than the evidence that he put to us yesterday—sorry, I might be confusing him with the Grattan Institute—which is: you look at comparable low income thresholds. They're two very different principles. I want to flesh that out a bit further because I thought that was particularly helpful to remind us that the principle was meant to represent the premium gained through access to tertiary education.

Ms Robinson : I think an important point here is, notwithstanding the proposed changes to HECS-HELP, the obstacles to students studying at universities are probably more around cost of living, particularly for regional students. There are a number of really significant financial issues that do serve as obstacles for students going to university that are probably of more consequence than moving the income threshold—not to say that that's not important—by a few thousand dollars.

Senator JACINTA COLLINS: You made a point about the additional regulatory burden that this package would put on universities. Can you expand on that point?

Ms Robinson : That's primarily in relation to the proposals for postgraduate scholarships and in relation to the performance funding. While we acknowledge that there is merit in considering both of those initiatives further, we do think it's premature to incorporate them into legislation when the potential unintended consequences are very substantial. These are really complex areas of public policy and they really haven't benefitted from the sort of discussion that you would normally expect for really complex policy initiatives. We are saying, apart from the fact that they are complex and do require further discussion, it's hard to see the way they've been characterised to date not resulting in the need for very substantial increases in public expenditure to support bureaucracies to administer them. When we look at the postgraduate scholarships, that looks to be a government-implemented program, which will be quite onerous in terms of its implementation and cost, and, with the performance funding again, will require very substantial bureaucracies also within universities for both of them—not just government, but universities as well—to implement and administer those programs.

Senator JACINTA COLLINS: You've been critical of the Deloitte report, Cost of delivery of higher education. I want to give you an opportunity to comment on that, but also to ask whether you've had a chance to look at the report that the government released yesterday about the public/private benefit of education.

Mr Teece : I think we've been critical of the use to which figures from the Deloitte report have been put rather than of the report itself.

Senator JACINTA COLLINS: Okay. That's back to the pattern of behaviour issue.

Ms Robinson : What we've pointed on a number of occasions is the report itself has acknowledged the limitations of the ability to compare this year's exercise of cost of delivery with the exercise that was conducted back in 2011. They had made very explicit that, in fact, you can't really do that. But we're not so much critical of where the report has got to.

Senator JACINTA COLLINS: No, I understand. And yesterday's report?

Ms Robinson : We haven't really had a chance to—

Senator JACINTA COLLINS: I would invite you to look at that on notice and see if there's anything that you think we should be aware of in that report.

Mr Teece : Happy to do that.

Senator JACINTA COLLINS: Now, to the 'belt-tightening' that the minister, in the media, is describing needs to occur. It would be helpful if you could outline how universities have become more efficient over recent times.

Ms Robinson : On the belt-tightening: who can disagree with the need and the desire to improve efficiency?

I would have to say that repeated cuts to the system over many years have resulted in considerable effort being undertaken by universities in looking at greater efficiencies and also identifying alternative sources. Primarily, this has occurred in relation to international education.

We keep hearing that universities are inefficient, but I haven't really seen any evidence to suggest that that is the case. On the contrary, we have seen some quite robust evidence to suggest that universities, as I said, subject to a decline in public investment in universities, are actually one of the most efficient systems in the world. Universitas 21, for example, ranks Australia third for output—when we talk about output, we talk about research output and its impact, student throughput, the national stock of graduates and researchers, the quality of the nation's best universities and the employability of graduates and so on—but it ranks Australian university systems 15th for input resources. In other words, that gap between third for output and 15th for input is a measure of efficiency.

Senator JACINTA COLLINS: Is that input just calculating public investment or is it both?

Ms Robinson : That is all resourcing. We are with the UK when we look at that gap. The gap between the two is a measure of efficiency. Only Australia and the United Kingdom are ranked in the top five for output and lower than the top 10 for resourcing. I will also cite another piece of work from Moradi Motlagh in 2015, which demonstrates that Australian universities have increased their productivity on average by 15.7 per cent in the six years to 2013, and 2.6 per cent per year. This is mainly due to technological and system-wide progress. So technology has certainly provided opportunities for universities to be more efficient—

CHAIR: Just on that point, Ms Robinson: do you mean they are getting paid the same amount to deliver a course online to a student who is off campus as they are to somebody who is on campus, requiring a lecture theatre and additional resources—that is, grounds keepers, administration and lecturers. When you talk about efficiency—

Ms Robinson : In terms of technology and the opportunities that technology provide, it is not just about substituting for face-to-face teaching, because, in fact, that is not always cheaper. It costs quite a bit of money to set up those systems and so on.

CHAIR: Not in the first year but over a decade, I would argue—

Ms Robinson : There are huge efficiencies. Over time, the per unit amount would be, if, of course, you didn't take into account that what most universities do is blended learning. Where you had the lecture theatres of 200 students, you might have more of that material online; but what is more expensive is the more personalised attention that is given by universities, which requires the building of student learning hubs but also those smaller groups where they are interrogating the learning. So we talk about blended learning an awful lot.

CHAIR: With respect, Ms Robinson, what we heard from NUS yesterday was that the student experience is declining. They are not getting that intensive tutorial experience that you are suggesting they are on campuses around Australia. They are increasingly being taught by casualised staff and they are not getting that high quality engagement that they thought they would in an undergraduate degree. That was the evidence yesterday from NUS.

Mr Teece : Senator, that is not what the student experience survey shows.

CHAIR: I think the student union would be using a different set of metrics from the student experience data.

Mr Teece : I am sure they are. I would just point out that the student experience survey shows 80 per cent satisfaction with the quality of the entire higher education experience, and that is a measure that has been trending up over the long term since these figures were first collected in, I think, the early 1990s.

Ms Robinson : We would be interested in what metrics they were using and what the evidence is for that.

Senator JACINTA COLLINS: It sounded a bit anecdotal to me at the time.

CHAIR: She said they did a survey—

Senator JACINTA COLLINS: They are doing a survey now.

Mr Teece : They mentioned a survey.

CHAIR: They did one in 2015.

Mr Teece : We'll check that out.

Ms Robinson : The government, as you know, does a student satisfaction survey, and those levels have been increasing quite substantially. We have almost 90 per cent of students indicating a very high level of satisfaction, so that doesn't quite make sense to me.

The other point that I would make is that technology is not just about delivering courses online; it's also about delivering efficiencies—backroom efficiencies and efficiencies about the way courses are taught through simulation, for example. So technology offers opportunity for efficiency not just through online learning.

I think the point that we're getting to here is that you can't have it both ways. The minister stood up when he was giving the briefing and said, 'We're doing this because universities have become so much more efficient that we can now withdraw $2.8 billion worth of the system,' but at the same time the government is then accusing universities of not being very efficient, which I think is what we're getting here. So what is it, and where's the evidence?

CHAIR: Maybe the issue is the lack of transparency, in that $17 billion is handed over to a sector for a certain purpose. I think $7 billion in the last financial year was specifically for the provision of undergraduate courses, but we have no appreciation of whether that's actually going to undergraduate students and the teaching and learning provision for those students that the taxpayer is paying for so that we meet the labour markets, not to mention the individual benefit that students get. If it is the case that universities are as efficient as they can be despite a 700 per cent increase in vice-chancellors' wages, whilst the rest of Australia hasn't seen a wage increase in the last two to three years, what is wrong with making that more transparent?

Ms Robinson : I don't think there's anything wrong with it, and I think you make a very valid point about university accountability for every taxpayer dollar that is spent. I would say, though, that I disagree with you that there is not that accountability. There are measures that indicate that universities are delivering the outcomes that are being required of them. In terms of employment, university graduates, we know—

Mr Teece : Around 86 per cent are in full-time or part-time employment four months after they complete their degrees. About 74 per cent are in full-time employment. That number has started moving back up again after a long decline following the GFC.

Senator JACINTA COLLINS: When you say 'part-time employment', most of them would probably already be in part-time employment.

Mr Teece : Many of them are; that's right.

Senator JACINTA COLLINS: So are we talking about a gain in part-time employment, or are they just continuing?

CHAIR: Yes. What's the value-add?

Mr Teece : I'm happy to take that one on notice. I'm not sure we can dig that out of the figures.

CHAIR: If I'm working full time at Macca's, I'm still working full time.

Mr Teece : Unfortunately, there's a little bit of that, but 74 per cent of graduates are in full-time employment after four months. Over the next three years, there has been around a 10-percentage-point gain in that figure. We're looking at around three-quarters of them in professional and management positions according to the ANZSCO classification of occupations three years out from finishing their degrees.

Ms Robinson : On top of that, attrition rates are, in fact, considerably lower than they were in the 1950s, for example, and haven't really moved over a 10-year period. Retention rates are comparable with—

CHAIR: But that's on average, wouldn't you say?

Ms Robinson : On average?

CHAIR: Attrition rates on average haven't moved.

Ms Robinson : Yes.

CHAIR: But, if we actually drill down in that data, there are certain cohorts with the demand-driven system. Because we've expanded access, aren't there a range of attrition rates?

Mr Teece : Different institutions have different attrition rates. Different cohorts show different attrition rates.

CHAIR: Yes. So to say attrition hasn't changed since the 1950s—

Mr Teece : Well, it's improved a lot since the 1950s. I think that was Belinda's point.

Ms Robinson : It's improved incredibly since the 1950s and hasn't changed in the past decade. I guess you're asking about transparency and results and being accountable for the outputs of universities and being responsible for what universities do. We're saying attrition rates are at least as good as—and substantially better than—they were in the past. Employment rates are strong, retention rates are comparable with most other developed economies, and student satisfaction rates are increasing. All of that's transparent.

We also have QILT, Quality Indicators for Learning and Teaching, which, I think, is a terrific policy development and is only getting better. The whole purpose of that is to make more transparent what universities do and what they are delivering so students can make better and more informed choices. On top of that, of course, we have the admissions transparency work that I was very pleased to be a part of. I have to say it was a real textbook approach to the partnership that I always talk about between our sector and government in addressing an issue that the government feels there is a need to do so. It was transparency around the admissions so, again, students could have access to better information on universities' admissions processes so that they can make more well-informed choices. I would argue that there is a lot of transparency there—

CHAIR: So what is the problem with performance criteria? You have the data and you are telling is that the data is great—

Ms Robinson : Maybe the government needs to tell us that because the very point we make—

CHAIR: I was at the same announcement as you, along with a lot of vice-chancellors. The minister made it very clear that it was not going to be a one-size-fits-all policy and that it was going to take into account individual universities' charter and community obligations and that it would be working with each and every one, but that it would not be implemented until 2019. Here we have vice-chancellors, who two years ago were very happy to get these savings out of students' back pockets, but now that it is actually walking through their front door, they are now standing as one. Where is Canberra university now? They are standing as one in saying, 'Not our bucket.' It is probably too cute by half to say that the stats are great and ignore the fact that the minister has been very clear that this will be a staged, consultative process, focused on universities. This minister has a record you can trust—his word is his bond. I do not know why the sector has a sense of insecurity in dealing with Minister Birmingham.

Senator JACINTA COLLINS: He has a pattern of behaviour that is very different to that characterisation.

CHAIR: I do not agree.

Mr Teece : I would say that none of that detail and few of those assurances on performance funding are actually in the bill. Our concern is about legislating the system before you have designed it.

Senator JACINTA COLLINS: And ministerial discretion.

Ms Robinson : We made it really clear in our submission that we have no problem with the idea of supporting universities in continually improving performance. Who could argue with that? No-one can. As Mike says, the key issue is not that we should not have a performance regime, our key issue is: let's have a clear articulation of the problem we are trying to solve. There has not been clear articulation of that problem. Is the problem that we want a 100 per cent retention, which then we will have a whole bunch of unintended consequences? What is the right number? There is no right number. Is it more than 80 per cent? Is it just about retention? We have already heard from the Higher Education Standards Panel, which released their discussion paper not long ago, to say there is no crisis with retention and attrition. All of that is suggesting that, before you legislate, perhaps at least there should be the courtesy shown in saying, 'Here is the problem; this is what we are trying to achieve.' But that has not been done. That is not to say that there should not be a scheme; all we are saying is, 'Let's pause the legislation.' As you say, there is a commitment to a 12-month consultation around measures. Let's make that a 12-month consultation around the whole scheme so that we really understand what we are doing, why we are doing it and what is the best mechanism for dealing with it.

CHAIR: Aren't we tired of consultation on this topic? Vice-chancellors yesterday were consulted until there was nothing left to talk about. Every good idea has been wrung out of this system. I asked vice-chancellors yesterday and this morning: how would you solve this issue between the financial sustainability of what we all agree is a system that has increased accessibility, particularly for marginalised and disadvantaged students, in a responsible manner in a fiscally constrained environment? There were no ideas other than, 'Don't touch us.' From the brightest minds in this country, I just find that incredible. They had no idea, just 'Not me.'

Senator JACINTA COLLINS: I don't think that's a fair characterisation.

CHAIR: That's my summary.

Senator JACINTA COLLINS: It's your summary.

CHAIR: Yes, it is.

Ms Robinson : I think that's a little bit tough. I think there have been tonnes of ideas that have come through over the past 12 months. We were just talking about performance funding. There hasn't been any consultation around that system actually. We can say everyone is suffering consultation fatigue. Well, I never get sick of talking about higher education.

CHAIR: I'm not saying that. I think some in the sector are saying that.

Ms Robinson : I never get sick of discussing higher education and research. You will have to drag me out in a box before I stop.

CHAIR: Hopefully it won't get to that.

Ms Robinson : It might! You were talking about performance funding. I do think it is a bit of an unfair response because we are not saying, 'Let's not have a performance-funding scheme.' But a punitive scheme that is going to punish, particularly the very institutions that require the most support to enable them to provide the support to some of the most disadvantaged students, ain't that scheme. That just in and of itself kind of suggests that we need to discuss this in a little more detail. We also need to think about the incentives that would be provided by a scheme that attached funding to performance, whatever performance is.

A really important point that I'm not sure has been raised yet is this: one of the great things about the university system is the extent to which it does collaborate around best practice approaches to all sorts of things. That was particularly well supported through the Office of Learning and Teaching, which has since been abolished. They do collaborate on best practice models and, in this case, supporting equity groups and more innovative teaching delivery and pedagogies. If you had funding tied to it—and this is just one of many issues that would need to be teased out further which is why we are saying 12 months—and you introduce performance-based funding, universities are going to be far less inclined to share anything that they do well because 7.5 per cent of their funding is developed on, and I'm not sure that's what we are wanting to achieve.

CHAIR: Do you have performance criteria measures that might be useful in this debate for the sector to consider? I'm not necessarily convinced about attrition for all. What sorts of things do you think should be part of a performance criteria discussion?

Ms Robinson : One of the first things to recognise is who is best placed to determine what those measures would be. Every university, and you have heard over and over again from different institutions, will say that every institution is different. They deliver to different types of communities and different student cohorts, and they have different missions and so on. I think one of the real dangers here is about having a standardised approach to it. In looking at this issue, I think we need to look internally rather than externally. Having a standardised externally imposed criteria I don't think is the way to go.

CHAIR: But universities already have strategic plans over a long period of time. They already have KPIs that their own university councils assess their performance against. Surely, there is some commonality between what's in everybody's strategic plans.

Ms Robinson : Well, there might be and one of the ways to think about it too might be, if you are going to think about this as an external scheme, to ensure that universities do have those things in place and do ensure that there are processes for being able to measure performance over time against those internal measures that they have. So I think there are ways of doing it; I just think we need to talk about things a little further. I will mention that it doesn't look like it's going to be a stunning success, the TEF model in the UK. New Zealand recently introduced a performance-funding system that holds universities to common standard and penalises universities whose completion, retention and progression rates are below the sector median. We could be a world leader in this, by the way, if we took the time to do it properly. The New Zealand Productivity Commission in their recently released report, New models of tertiary education, has really strongly recommended against the system and has recommended that it be abolished. They have done that because they found that the system was stifling innovation in teaching practice and was leading to a culture of risk aversion and homogenisation—I mentioned that in my opening statement—and that the system was penalising providers when students left early for reasons beyond the providers' control.

I will mention one other point. We have to think about this too in terms of what is in the students' best interest. There is no point in stapling students' toes to the ground in a university if in fact they would be better off leaving at the end of first year or second year to do something different and in fact, by doing so, saving considerable taxpayer dollars that might otherwise be wasted on them continuing at university when there might be better choices for them.

Senator JACINTA COLLINS: Are we in the same boat with the postgraduate voucher scheme?

Ms Robinson : I think you have heard from a number of people a variety of views in relation to this.

Senator JACINTA COLLINS: I mean established as a process from here. Should there be further consultation?

Ms Robinson : I think that has probably clearly come out of the discussions that you have already had. However, there will always be—I think it has been very clear that there are—different views in relation to that. Many people have said so far that the system is inequitable as it currently stands. But it is a very thorny and difficult issue. I remember one of the first things when I came into this role was that the Labor government did a very significant piece of work—a discussion paper on how to deal with postgraduate places. I think they ended up putting up three or four options. That kind of moved on. I have to give credit to the government for really trying to tackle this head on, but on the basis of the views that have already come forward around the uncertainty, the bureaucracy, the cost—certainly around criteria—I think it would be a very prudent move perhaps to further discuss this with the sector. I think the sector has demonstrated—and certainly a number of universities that I have heard contributing to this Senate inquiry have offered and made very constructive comments around their preparedness to work with the government on exploring this in more detail, because that, along with the performance funding perhaps, was one of those design elements that had not really been talked through in any detail in the lead-up to the announcement.

Senator JACINTA COLLINS: As it stands it would be the first voucher system we have seen in the Australian education system, wouldn't it? This is the minister's thought bubble on vouchers.

Ms Robinson : I'm not sure I can answer that. There has been discussion around voucher systems on and off—

Senator JACINTA COLLINS: He has discussed it in other education areas as well. This is his idea to trial his ideas.

Ms Robinson : I think the point with this is that that is one element. There is uncertainty for universities. How do they plan? There are all sorts of issues around it that, as I say, I think would benefit from further discussion. The sector has made very clear a desire to work very constructively with whichever government is in place to sort that out.

CHAIR: As a matter of principle, looking at the regional experience, for instance, we have these postgrad places that are historically with the Go8's of the world, the entitled elites, who are not using the places. We have got students who want to do postgraduate course study, and we are talking about single parents et cetera—and being able to increase their capacity and their access—being unable to access, for instance, studying locally here a masters by coursework et cetera postgraduate qualification. Surely as a matter of principle Universities Australia would be supporting a system whereby students get to decide where they need to do their study rather than it being prescribed.

Mr Teece : I don't think anyone would support the current system. We are not convinced yet that what is proposed will be an effective solution, because we are not sure how it will work. But, yes, there are different views on what an effective solution might be.

CHAIR: Thank you.

Senator JACINTA COLLINS: I was just going to ask whether, in closing, you would like to elaborate on the economic impact of the $2.8 billion in cuts. What impact do you think it will have on a very successful higher education sector?

Ms Robinson : The impacts will be felt variably across the sector—and, again, I think that has come through many of the conversations that you have been having. There is no doubt that the cuts will have an impact right across the sector, but they will have an impact in different ways, depending on the profile of the institutions. What we are talking about here is around $1.7 billion being taken out of the CGS over the forward estimates. If you take into account the rebalancing between the private and public contribution, that would be about $1 billion taken out of the system over the forward estimates.

I would also just mention that that comes on top of the $3.9 billion contribution that the sector has already made to budget repair. So we have already had $3.9 billion come out since 2011. It also comes on top of the proposal by the government to repurpose $3.7 billion from the Education Investment Fund. So not only will the impact be as a direct consequence of the reduction through the application of the efficiency dividend of $1 billion; but also, with less, they are going to have to do more because there will no longer be any capital investment fund for universities, to the tune of $3.7 billion. And, of course, that fund has not made a payment since, I think, about 2011 or 2012.

Mr Teece : The very beginning of 2013 was the last payment.

Ms Robinson : So this will have an impact. You have already heard from a number of institutions on the very significant impact that it will have on them. It is going to hit particularly hard those universities who are already facing financial difficulties. I mentioned in my opening that, in terms of surpluses, around half of the universities have deficits and/or surpluses of less than five per cent. Those surpluses have been declining year on year. Mike, I think you probably have the stats on that.

Mr Teece : Yes. Across the sector, the operating margin has decreased by eight per cent nominal between 2009 and 2015, which is equivalent to 20 per cent real. We have moved from a situation where three in five universities had a surplus of greater than eight per cent to a situation where I think one in five universities has such a big surplus now. As Belinda said earlier on, state audit officers have noted this trend and noted an emerging risk to the finances of universities and their operations.

Senator JACINTA COLLINS: That is very different to what the minister says—rivers of gold!

Ms Robinson : The statistics that we have is that in absolute nominal dollar terms the surpluses declined by eight per cent in 2015 compared to 2009 but, in real, constant, 2015 dollars, surpluses have declined by 20 per cent since 2009. As a percentage of total revenue, surplus margins for the whole sector have declined from around nine per cent in 2009 and 2010 to 5.8 per cent in 2015. If you exclude VET, the sector recorded a surplus margin of an average of 6.1 per cent, or a $1.7 billion surplus, in 2015.

So, as I say, there are many universities that are really doing it tough, and this will make it very difficult for them, and of course that means that very difficult decisions are going to have to be taken. They are going to have to look seriously at economically unviable programs, economically unviable courses and so on.

CHAIR: Vice-chancellors' remuneration.

Ms Robinson : They will be looking right across the board and difficult decisions will have to be made. On vice-chancellors' remuneration—

CHAIR: A 700 per cent increase.

Ms Robinson : That is interesting but, first of all, let's just remind ourselves that vice-chancellors are managing very complex, multimillion dollar and in some cases multibillion dollar organisations. And, while it is perhaps an interesting topic for some, we are talking about 0.1 per cent, one-thousandth—

CHAIR: I appreciate that, Ms Robinson, but you are keen to quote the UK experience—which actually has no relevance to this public discussion that we are having at the moment. But, if you similarly wanted to go to the remuneration of vice-chancellors in other countries, my understanding is that it is not comparable to the level of remuneration in this country.

Similarly, just on notice, if you could give us some sense of the increase in advertising and marketing budgets at universities over the time since the demand-driven system has been in place, I would appreciate understanding the escalation in that particular spend. I have asked—and I know you were in the room earlier—each of the universities that have come. Obviously the increase in student load requires more spend on campus, or off campus, but I really want to understand whether that has been a proportional spend, if you like. Given that the taxpayer is paying for undergraduate teaching and learning, there is some suggestion that universities have spent the money on increasing their research profile rather than on the provision of the teaching and learning aspects. If you could give us—on notice, because we have run out of time—some sort of sense of that from your membership, I would really appreciate it.

Ms Robinson : We can do that. We hear a lot about the need to properly inform students so they can make wise decisions and choices about where they study. One of the reasons the demand-driven system was introduced also was to increase competition. It is very difficult to deliver on the positives of competition without institutions being able to advertise and market what it is they do, what differentiates them from other institutions.

CHAIR: I appreciate the role of marketing in a demand-driven system. I would just like to get some quantum of the money spent.

Ms Robinson : We are happy to do that.

CHAIR: Also, when we say 'properly inform students', this is just a little pet mission of mine, and this will probably be my last education hearing as chair, so I would like to understand from each of your members how they inform the student body of the fees that are going to be paid as a result of the course they are signing up to. If I go and buy a fridge, there is a big sticker on the front of the fridge saying how much that is going to cost me. I would just like to know how, in their enrolment process, they inform students of the price of the degree.

Ms Robinson : We can do that and we will also demonstrate that, for a number of the most popular courses, they are contributing 90 per cent to those courses.

CHAIR: Thank you so much. We really appreciate your evidence here today and your ongoing advocacy for the sector.

Ms Robinson : Thank you.