The 2025 election will be the first for a long time where we know in advance the respective policy positions of the two major parties on higher education.
Despite this, interestingly, we’ve not heard a huge amount of commentary about it in the lead up (appreciate daily updates from the White House have been taking up much of the media’s attention).
The current government’s policy is centred on the implementation of the Universities Accord. For the Coalition, Senator Henderson’s recent speech at the UA Conference set out what a Coalition government would do. It is rare for both parties to be this explicit before an election about their higher education policies.
So, what would higher education policy look like under the two different alternatives?
Sector oversight
If Labor is re-elected, they will proceed with the creation of ATEC. Minister Clare has already announced the identities of the interim Commissioners, who will assume office on 1st July 2025, with legislation being introduced later in the year to establish it permanently.
ATEC is the centrepiece of the Accord reforms, and will oversee the implementation of new funding arrangements, promote the harmonisation of the post-secondary sector and enter university specific compacts. In our recent Higher Education Annual Report we highlighted some of the strategic considerations for universities ahead of their first meeting with ATEC, should it come to pass.
By contrast, the Coalition will scrap plans for ATEC and leave the oversight of the sector to the Minister and the Department of Education. This is hardly surprising – adding more public servants to oversee the university sector was never likely to find favour with the coalition electorate. Instead, Senator Henderson committed to the introduction of an ‘Australian Universities Performance Index’ that would make university performance on key student related measures more transparent.
Funding
Labor has already announced plans to proceed with a new ‘Needs Based’ funding model, and a system of managed growth across the sector. The details of these new arrangements are yet to be fully sketched out – this will be the task of the Interim ATEC Commissioners, together with a review of the current Job Ready Graduates (JRG) system of student contributions.
The Coalition’s position on these new funding arrangements is unclear. In her speech, Senator Henderson committed to a review of JRG while signalling that the Coalition’s position on it had not changed since its introduction in 2020; and implied scepticism towards the proposed new funding models.
International students
Labor has already moved to constrain numbers of international students enrolling at Australian universities through Ministerial Directive 107, now replaced by MD 111. This has had a significant impact across the sector, positive and negative, and is upending university business models – models that have been tacitly sanctioned by successive governments over many years.
Senator Henderson indicated that the Coalition would adopt a tougher approach to student numbers, especially for universities in inner city Sydney and Melbourne. It’s not clear what mechanism would be adopted to achieve this.
What will these policy changes mean for the higher education sector?
- Continuing pressure on costs – whatever the election outcome, universities face a period in which their revenue will be constrained through caps on international students and controls on domestic ones. All universities, sooner or later, must look carefully at their cost base and adjust their recurrent cost structure to sit comfortably within their likely revenue. Some universities are already addressing this, because they have no choice. Other, perhaps those with stronger cash reserves, are focusing on containing cost increases through measures such as hiring freezes, travel bans and the like, in the hope that the revenue outlook will improve. But even those universities with stronger balance sheets will need to address their cost structures eventually, otherwise they will run down cash reserves that could otherwise be used for future investment.
- Uncertainty – unless Labor is returned with a clear majority, which seems unlikely at the time of writing, the sector is set for a period of uncertainty. A minority Labor government may not be able to gain parliamentary support for ATEC and the funding reforms it would oversee; and a Coalition government would have little time in which to devise new funding arrangements to replace those planned for the start of next year.
- A split in the sector – the effect of MD 107 was to split the sector according to risk assessment levels. Those with strong ratings were beneficiaries because the effect of MD 107 was to channel students in their direction, while those with poor ratings suffered significant downturn in international student revenues. This means that different universities are very differently placed as we enter 2025. Conversely, a Coalition government would target the very universities that benefitted the most from MD107 – the inner city GO8’s in Sydney and Melbourne. Either way, it will be increasingly difficult for the sector to speak with one voice.
There is much to consider as we enter the polls. The two parties, while differing positions on a number of key higher education issues, still mean the operating environment is going to be an extremely challenging one for institutions across the country. All will need to overhaul and redesign financial and operational strategies that best enable them to weather this period of uncertainty. This means universities will need to develop clearer lines of sight of their cost structures and their ‘cost to serve’. This will help them better understand the costs and benefits of different strategic choices and set themselves up for a sustainable future in a revenue constrained environment.
These new economic and operating constraints somewhat mimic the way those voting feel about cost-of-living pressures; it’s been hard, and it’s only getting harder. I’m just not sure the average pollster is thinking about higher education when they pick up that pencil, but it’s definitely something that should be higher on the mind of many.
