Analysis of costs and savings of Proposed Reforms to Higher Education

PublishedJuly 2020
PublisherBankwest Curtin Economics Centre

The Australian Government recently announced a Higher Education Reform Package that has the overarching objective of incentivising students to “make more job-relevant decisions about their education”. The proposed reforms includes changes to both student and Commonwealth contributions to higher education fees across subject disciplines, with STEM, Health and Science targeted. The reform package also includes an additional 39,000 student places by 2023 in order to meet the expected demand resulting from poorer labour market opportunities as a result of COVID-19.

The consequences of these reforms mean that we will see a number of fields affected by increases or decreases in total funding relative to previous Commonwealth and student contributions and to current typical costs, in line with the government’s objective “to better align the cost and revenue of a university degree” (Figure 1). Most courses will have lower total funding overall relative to current median costs, with the exception of Medicine and Agriculture. Medicine will now receive total contributions that are $9,474 above the cost of delivering a typical course, compared to $7,248 previously. While the Commonwealth contribution to Agriculture increases by $2,554, total funding for agriculture now falls below the typical delivery cost by $2,549.

While total funding from both student and Commonwealth contributions will be closer to the median cost for most courses, student contributions have increased substantially for a number of courses. This includes the Society and Culture disciplines, which comprise of Law and Economics, History and Sociology and Philosophy and History.

We also consider the impact of the proposed changes on universities. Student preferences under the HECS system also mean that the most likely behavioural response will be from universities in response to the total funding received. This has the potential to impact on both the number of places offered and the quality of Australian universities.