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Inaugural Murdoch University Banksia Association Lecture: Murdoch University, [Perth]: 3 October 2006.

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I am delighted to be at Murdoch University for the inaugural lecture of the

Banksia Association.

Australian society values the contribution of our higher education sector and has high expectations for our universities.

There is an expectation that Australian universities will provide a high quality education for their students and equip them with the skills that employers will be seeking for the jobs of the 21st Century.

Our universities are expected to carry out research that is both high quality and relevant and universities must create new knowledge to underpin our nation’s innovation and competitiveness.

We expect our universities to be accessible no matter the socio economic background of the students. And we expect our universities to be accountable for their performance and to the taxpayers who sustain them and to be transparent in their operations.

Our universities must be internationally competitive.

Currently, there is a high reliance on the Australian Government for funding, both directly and through our management of student loans schemes - accounting for almost 60% of total funding.

And of the total public funding for universities, 98% comes from the Commonwealth.

I am not be suggesting that there be any reduction in our commitment to the sector, but I believe there are additional streams of funding which - historically - have been overlooked.


And that is what I want to talk about today.

But first let me put my views in context.

Today, Australia’s universities have access to higher levels of revenue than ever before. In 2004, total revenue available to higher education institutions from all sources was $13 billion - an increase of more than $5 billion or a 65% increase on 1996 funding levels.

As a result of Backing Australia’s Future and related initiatives, the Australian Government will direct more than $7.8 billion to the sector this calendar year - up from $5.3 billion in 1996.

Overall, these reforms will result in the sector being $11 billion better off over the next decade.

Recent figures show that our universities are financially viable, collectively holding over $7 billion in cash reserves and investments.

Australia’s funding of universities is often compared unfavourably to countries such as Finland and Sweden, where virtually all funding comes from the public sector and students pay minimal or no contribution - although this is changing. However, proponents of this type of model fail to mention government taxation rates in Finland and Sweden.

Government income tax rates in Finland increase to 38% for all income above $50,000. Add local government income taxes of 15% to 20% of income. Plus a 2% religious tax, a property tax of 4% and a

GST of 22%, and you see the size of the public purse available to the Fins government!

Sweden's personal income taxes are the highest in the world. The combination of state and local income taxes mean Swedes pay 42% up to $68,000 and 56% on income above that. They also pay a GST of 25%.

Thus, when comparisons are made, the Commonwealth spend is a fair contribution to the needs of the higher education sector in this country.

But are we overlooking obvious sources of additional funding?

If the Commonwealth contribution represents 98% of all public funding to the higher education sector in this country, then there is a striking anomaly.

Universities are creatures of our states, set up under state legislation, they are accredited, registered, audited, governed by the states. The states even nominate their representative for Councils and Senates. So where is their financial contribution? Just 2%? And that figure is debatable.

Let me give you an example, in 2005 the state and territory governments provided around $230 million in state grants to universities across Australia.

Page 2 of 8 The Hon Julie Bishop MP - Media Centre

What is not as widely known or appreciated is that while states contributed $230 million, they took out more than $377 million in payroll tax. State and territory governments in fact profited from their universities in 2005 to the tune of $147 million.

In other comparable federations, state governments acknowledge the benefits to their communities of their universities and contribute accordingly. So there’s an obvious untapped source.

Another is the alumni. I have heard it said that because Australian students now pay tuition fees we cannot expect them to make any other contribution to their alma mater at any other time throughout their lives!

Australia has one of the fairest higher education systems in the world, recognised as such internationally, where virtually every eligible person who wants to undertake university studies is able to do so in a Government-subsidised place.

In 2005, over 90% of eligible year 12 students were offered a place at a university in their home state.

We have a record number of students at our universities, almost 1 million students, an increase of nearly 40% since 1996. And about 96% of all Australian undergraduates are in a Government-subsidised place.

HECS was introduced by the ALP in 1989 to ensure that students made a fair contribution to the cost to the taxpayer of their studies, given the potential lifetime earnings for a graduate.

Today for every $1 a student contributes to their education, the Australian Government contributes $3. Students pay 25% of the cost of their fees, the taxpayer picks up 75%.

Since 1989, almost 2 million people have been able to access higher education opportunities through Australian Government funded loans (HECS and HELP). There are no upfront fees and they are income contingent.

Today students only begin to repay the debt when their income exceeds $38,149 per annum.

To date, around 780,000 (41%) of people have repaid their debt. The average outstanding debt is around $10,500.

So let’s focus on the potential of greater private and corporate philanthropy in our universities.

The higher education sector needs to consider seriously ways that it can increasingly engage both the corporate sector and its own alumni to optimise the resources, commitment and experience these valuable partnerships can provide.

It is well known that universities in the United States enjoy substantial philanthropic support, with a significant amount generated through their alumni networks. However, it is a mistake to assume

that it is a cultural quirk or somehow tied to their tax system.

University philanthropy has not happened by accident in the US. Their universities and colleges have developed a highly professional approach to engaging their alumni for the purposes of fund raising. Many institutions have large departments devoted to liaising with alumni and working to actively promote philanthropy.

And the results are astounding, with donations to US universities reaching a record A$32.6 billion in 2005.

Harvard University was most successful in raising A$722 million. Overall, donations from alumni accounted for 28% of US university philanthropy, non-alumni individuals donated 21%, corporations 18% and charitable foundations 25%. Philanthropy accounts for about 20% of total funding to some individual US universities and almost 15% across the sector.

This contrasts with Australia, where the sector currently receives less than 2% of its income from philanthropic sources. We do not compare well with leading nations in the field of philanthropic support or in

terms of alumni engagement.

However, this is not a societal issue as Australians are among the most generous people on earth when it comes to donating to worthy causes.

The taxation system is not an impediment - with the ability to fully claim such donations.

In one sense, it is cultural, in that while there is a culture of giving in Australia, there is not a culture of asking by the university sector.

I can cite my own experience and it is typical of others. In 1996, I attended HBS for the Advanced Senior Management Programme. At graduation, I was provided with a lifetime e-mail address to keep in touch with classmates and lecturers; I receive a class newsletter published regularly with other class news; I am invited to annual reunions of my class, as well as all the HBS lecture series held in Boston or in Asia, or elsewhere; there are opportunities to meet with Harvard professors visiting Australia; I am a member of the Harvard Club of Australia and attend dinners in Sydney and in Perth and mix with other Harvard alumni.

And from this constant contact, Harvard promotes itself, its courses and ensures a continuing supply of fee-paying students from Australia. I read this morning that John Worsfold is to attend a Harvard or Stamford course - encouraged by their alumni here in Australia.

And many feel an obligation to give back what Harvard has given to them. This pattern is replicated in countries around the world.

Compare my Australian experience. In the 1970s I attended Adelaide Law School in Adelaide. After graduating I heard nothing more. No communication over the last 28 years, until earlier this year when it was published in the press that I was an Adelaide Law Graduate and

the V-C sent me a warm note saying what a lovely surprise it was to learn that one of their graduates was the Federal Education Minister!

This was the norm, not the exception.

I think of my classmates, who, like me, became partners in major law firms, or went on to be CEOs in major businesses. Have they been contacted?

To my observation, by and large, there has been little effort given by Australian universities to developing and maintaining links with alumni over an extended period.

The graduate data bases maintained by US institutions contain a wealth of information. The Australian higher education sector cannot afford to ignore the valuable networks of their alumni, and the potential to tap philanthropic sources of funding.

Our higher education sector, assisted and encouraged by the Australian Government, needs to develop a much more significant culture of philanthropy in Australia.

The challenge is to create a higher education sector that is engaged with the community, and more importantly with its network of graduates.

There are almost 3 million Australians aged 25-64 with a university degree, many of these people are working in the corporate sector, many are leaders in their field or running small and medium enterprises.

Graduates dominate the ranks of the professions.

Gross lifetime earnings of a graduate are currently estimated to be around $700,000 more for males and almost $500,000 more for females, compared with non-graduates.

The role of philanthropy is to support the development of excellence and not to provide basic maintenance or core funding. Philanthropy has the advantage of coming without too much red-tape attached - unlike public funding, which is necessarily accompanied by stringent accountability measures.

Ideally, a greater focus on philanthropy would enable universities to undertake activities that they would otherwise have to decline, to take risks that they would otherwise have to avoid.

Just as philanthropy has enabled the pursuit of excellence within the private school sector and research sector - notably the medical research sector - too can it enable the pursuit of excellence in the uni sector.

Philanthropy can endow chairs with competitive remuneration needed to attract high quality academics. It can be used to offer merit-based scholarships to ensure that the best students, both domestic and international, are engaged and supported.

Philanthropy is also an enabler of diversity. It allows universities to experiment with innovative means of teaching, new courses and the application of emerging technologies.

There is great potential for philanthropy as a means for universities to promote equity, to drive better outcomes for Indigenous students and those coming from families and communities that do not have a tradition of going to university.

An outstanding example of this kind of philanthropy is the Bill and Melinda Gates Foundation. The two simple values that lie at the core of the Foundation’s work are:

z all lives—no matter where they are being led—have equal value;

and z to whom much has been given, much is expected.

Murdoch University is to be congratulated for securing a research grant of $12.6 million from the Gates Foundation, in recognition of the leading-edge work being undertaken by the Centre for Clinical Immunology and Biomedical Statistics in the field of HIV medicine.

Recently British Prime Minister Tony Blair said it was unsustainable for taxpayers to bear the full cost of higher education in light of the huge and growing demand for university graduates. He also used the US example to urge UK universities to build similar programmes and to engage support from industry and business foundations.

Apart from benefiting the bottom line, philanthropy has provided many of the leading United States universities with the flexibility to take risks and has enabled an independence from government. Something which Australian universities can only envy.

Critical elements of a philanthropic culture are already in place in Australia. In 2004, for example, more than 13 million Australians, or around

87% of our adult population, made a donation of some sort - average was $424 per person.

The giving of money, goods and services to non-profit organisations by business and individuals is estimated to total around $11 billion annually.

Of this, health non-profit organisations, including medical research organisations, received about one in six of the total value of donations by individuals, one in ten of all hours volunteered and almost one in five of the total value of business giving.

By contrast, the education non-profit organisations receive about one in twenty dollars of all donations from individuals and business - which is directed to schools and parents’ groups.

A number of reviews into Australian higher education institutions have already suggested that universities should look to increasing their philanthropic effort to provide an additional revenue stream.

In response to these reviews, some Australian universities have

developed strong communication strategies and alumni networks to enhance their fund raising activities, but this is uneven across the sector and the maturity of institutional approaches varies widely.

Murdoch University stands out as having had considerable success in securing both corporate and individual philanthropy.

In addition to the funding from the Gates Foundation the university has:

1. established the Murdoch University Veterinary Trust, which has raised $1.6 million to support the work of the Vet School; 2. campaigned to raise $2.5 million for the Law Library and new Law Building; and 3. established the Murdoch University Foundation to encourage

and facilitate fundraising as well as other initiatives.

I note that much of the success in these areas is due to the hard work of the Vice Chancellor, including his decision to invest in the establishment of an Office of Development with resources to support university staff in fundraising activities.

So, where to from here?

I have asked my Business, Industry and Higher Education Collaboration Council - headed by David Murray - to advise me on strategies to develop a culture of philanthropy towards and from within Australian universities, including strategies for business and government to encourage alumni philanthropy.

The Council will conduct research and analysis that will assist in the building of a culture of philanthropy. Specifically, the consultancy will:

z identify how universities currently engage with potential donors,

including alumni; z review and identify best practice nationally and internationally;

z develop a set of national best practice guidelines; and

z identify practical, cost effective options that will assist

universities to become more strategic in their fundraising.

The Council will consult with key stakeholders including universities, business, state governments, university development professional offices and peak philanthropic bodies to review and identify best practice nationally and internationally. I have allocated $200,000 to support the council’s work.

Another avenue I am exploring is to increase philanthropy through the existing taxation mechanisms and I recently met with Mr David Gonski, Chair of the Tax and Philanthropy Working Group of the Prime Minister’s Community Business Partnership. He has provided me with some ideas, which I am working on.

Together, we can create a higher education sector which has the hallmarks of excellence and responsiveness, one that satisfies the needs of present and future Australians, and one that meets the many and varied challenges of a rapidly changing world.

And finally, I commend the work of the Murdoch Banksia Association, which serves as an inspiration to institutions throughout the higher education sector and beyond.

The work of the Murdoch Banksia Association is all about sustaining connections between people and institutions. It is about conserving rather than neglecting human resources.

At Harvard Business School I learned the truth of an old saying; “look after your people and the bottom line will look after itself”.

This applies not only in business, but also in universities.


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