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Tuesday, 24 February 2015
Page: 1148

Mr TAYLOR (Hume) (17:57): I rise to support the measures in the Higher Education and Research Reform Bill 2014. Of course, I spoke on this legislation when it was first introduced in the parliament and am deeply committed to these very important reforms. In fact, it has been really galling to listen to that fact-free moralising and fearmongering that we have had constantly from those opposite in regard to this bill—a bill, by the way, which is supported by all of the vice-chancellors of the G8 universities and most of the vice-chancellors across Australia. There is extraordinary support because this is so fundamental, significant and necessary for students and the university sector. The absolute lack of understanding of this sector that I hear from those opposite, who claim to really understand it, is just so galling. We have to go right back to basics and understand what is going on here. What do we need from our university sector, and what is going on there that is so critical that requires these reforms?

Let me start with the student side of the equation, which is the demand driven model that we have moved towards, which this government supports and which is so fundamental to the need to change the way we regulate and fund our university degrees. In 2012, of course, the government lifted previously imposed limits on the bachelor degree student numbers and moved to this demand driven system. It replaced a supply driven system, one which I grew up with and which I went to university with.

The new policy has been successful in increasing student numbers, and of course that is part of a much longer term trend increase in student numbers that we have seen for a long time now. In fact, we now have over a million Australian students enrolled in our universities. I was interested to see how that compared with the time when I went to university. I started in 1986, when it was 400,000. We have had a 250 per cent increase. Anyone who tells you that we have not worked out with fee-paying students and with HECS—HECS came in in the time that I was at university—anyone who says that we do not know how to increase access or that we have not done it effectively, is absolutely kidding themselves. We have seen this 250 per cent increase. I sat down and looked at what the growth rate was and it turns out that is 4½ per cent a year. What an extraordinary outcome.

Of course part of that process was Labor introducing HECS. Now they are talking about free education for all. It is extraordinary. I think they are going to wind it back if they get back into government. It seems to me to be the only logical conclusion from where they have been going.

There is one thing I agree with the member for Hotham about—and there is not much that she says that I do agree with—there is nothing more important than increasing access to education. But that is not because, as she said, we want Australia to be equal—only a communist would believe that equality was actually the objective—we want equality of opportunity, and reform in our sector is fundamental to achieving that.

The thing you have to remember is that the demand driven system has increased the cost of education for all taxpayers whether they went to university or not. The losers in that equation are those who have not gone to university and will never go to university. Yes, there are spin-off benefits from high numbers of students or enrolments in our universities, spin-offs to all Australians, and that is why the federal government should and will continue to pay a significant part of the cost of university education. But the idea that students should not pay their fair share is ludicrous and a slap in the face to the majority of Australians who are not receiving and will not receive a university education. I hear that every day in my electorate. It is absolutely appropriate that people make that all-important point.

Let me move to the second big trend we are seeing in our university sector, and that is intensifying global competition. Those opposite seem to want to put their heads in the sand when it comes to the global competition we are facing in our university sector. We heard from one of the earlier speakers on this side of the House that this is now our third-largest export. And what an extraordinary export opportunity we have tapped into here. When I started university—as I said, in 1986—the number of international students was almost insignificant. By 2013 the number of international students exceeded 300,000—or about 25 per cent of student enrolments.

To put this into perspective, though, the competition we face across the world is extraordinary. There are more students enrolled in China this year than the total population of Australia. That is what we are up against. Leading universities around the world, including my old university of Oxford, are fighting extremely hard for students, and Australian universities are competing head to head with these international universities. And, as I said, we cannot put our heads in the sand.

Heavy regulation of a sector engaged in ferocious global competition just does not make sense. We are handcuffing our universities at a time when they need to be liberated; unless we want those universities to lose in that global competition. But the cost of that will be enormous for all Australian university goers and for all Australians, because we must remember, as we heard from an earlier speaker, that there is a large cross-subsidy from those international students to our domestic students. So we cannot afford to lose them. Under Labor we were starting to lose them; we were certainly starting to see a big slow-down in growth in the number of international students. We cannot afford for that to continue. We need to free up our universities to compete in that ferocious global market place.

The third major trend at work in our university system is the extraordinary distortion we create from the regulation we have in place now, and particularly the fee regulation. It is heavy-handed. The government effectively sets the fees, with limited knowledge—as governments always have—of the costs of providing those courses. You do not have to be a particularly good economist to know that that is going to cause some huge distortions in the way universities behave. In fact the results can be simply awful.

Some universities focus on driving large numbers of students through the most profitable degrees, often in the social sciences and humanities, because they are cheap degrees and the fees have been set at a level where the universities can make a lot of money. Kids are being encouraged to do degrees where job opportunities are limited. So, with the way the system works now, it is great for a university to pump people through an arts degree where there are no job opportunities at the end for those kids. They get the money, but the student does not get the right education. So we have a huge distortion in the system.

The flipside of that is that there is an incentive to minimise the students going through degrees that make a loss. They tend to be in the science areas. In fact, we have seen an extraordinarily vivid example of this in agriculture. An agriculture degree is very expensive for the university, because it is scientific. Every student that goes through an agriculture degree loses money for the university. So what do universities do? They cut the numbers. We got down to the point where we were seeing less than 40 per cent of the number of students graduating from agriculture than was the case five years earlier. And this is at a time when one of the biggest opportunities for Australia is in agriculture. What an extraordinary distortion, and it is all caused by this heavy-handed regulation, which we need to see the end of.

At the same time, the universities have very little incentive to innovate in price and content of courses. At a time when technology is absolutely revolutionising so many industries—and few more than education, if only through online lectures and tutorials—there is a clear opportunity to leverage technology to provide new types of courses, particularly at lower costs than the regulated fees. However, the incentive to do this is limited in the current system. So, by freeing it up, we will encourage enormous innovation, which we are seeing at work across the university sector throughout the world.

The fourth major challenge at work, driving these reforms, is the challenge to our budget. The member for Hotham makes the cardinal error that Labor keeps making in thinking about the budget: they only ever focus on the next four years.

But the problem with our budget is primarily about what is beyond the next four years. Quite simply, if you run expenditure growth at a rate faster than GDP you have to keep raising taxes forever—every year! What Labor did—and the Parliamentary Budget Office gives us the numbers—was to lock in 3.6 per cent. No economist will tell you that we can possibly reach growth rates of 3.6 per cent. So, what does that mean? Do we keep raising taxes every year? We could get it through bracket creep, but we are probably going to need more. We will probably have to raise the GST forever more. And you can get up to extraordinary numbers by 2030—I am sure we will see these in the Intergenerational report—if you allow those locked-in expenditure growth areas that Labor committed to continue.

So, we have to look—as we are—beyond the forward estimates to that long-term sustainability of our budget. And, of course, one of the fastest-growing costs in our budget—because of the demand-driven system—is higher education. So, we have no choice. We have to contain it; we have to get our costs down to a level at, or preferably below, GDP—to, say, two or 2½ per cent—if we are not only to prevent increasing taxes or a Greek-style debt blow-out but to ensure that we get the debt and deficit that we already have under control.

The benefits of this legislation will help in all of those areas. For students, it will provide greater opportunity to gain a higher education, with around 80,000 more Australians able to access Commonwealth funding—and that includes Commonwealth supported places for all Australian undergraduate students at all registered higher education institutions. They will continue to have access to HECS, or HELP as it is now and, of course, the interest rate on that will not change.

What is particularly important to me in this legislation is that we are establishing new Commonwealth scholarships. I hear every day from the parents of students and students that come from my electorate in regional areas that the biggest barrier to them going to university has nothing to do with the fees—absolutely nothing to do with the fees! It is the cost of picking up, leaving home and getting accommodation in Sydney, or Wollongong, or Wagga or wherever it is that they go to university. That is the barrier, and what we are proposing in this legislation are Commonwealth scholarships which will contribute to solving that most fundamental problem for regional students—a problem that those on the other side of the House do not recognise.

The legislation provides for the universities to set their own fees and in this way compete for students, not only in offering the course but the price of the course. I am very confident from evidence we have seen elsewhere—and I will talk about some of that in a moment—that this will enhance the quality of the courses offered, making higher education providers much more responsive to the market and to the needs of students. Domestic fees will be required to be lower than international student fees, minus the Commonwealth subsidy. And, as part of the fee deregulation, the government will also direct the ACCC to monitor university fees. We know they have done a good job on this with energy and I am confident they will do a very good job with the university sector as well.

One of the points that is lost in this debate by those opposite, is that when you look at the deregulated part of the sector that we already have, which is post-graduate and international students, the vast majority of courses for those students are within a modest fee range of $10,00 to $30,000—$100,000 is not even in sight! Where this number comes from is just classic Labor fearmongering—fearmongering which is deliberately designed to ensure that the future of this country is undermined in an incredibly important area: higher education.

With that in mind, we need to remember that no government can afford, without raising taxes or cutting other services, to keep expanding student participation without a complete blow-out. All the higher education peak bodies in Australia that represent universities, TAFEs and private higher education providers agree that reform of the current system is absolutely necessary.

These changes will mean that students will be able to get an education of the quality they need—a truly world-class education in the courses they want and with the support they want. I commend this bill to the House.