The inaugural KordaMentha Higher Education Annual Report highlights three key challenges facing the sector and considers what actions providers can take to best position for the turbulent environment.
Fig. 1: Despite slight improvements, total student (EFTSL) numbers have not returned to pre-COVID levels
Challenge 1 | Revenue pressure and rising costs
For the last 30 years, higher education across Australia has been on a growth trajectory. Total student numbers, domestic and international, have expanded and research expenditure has increased. Australian higher education has been a huge success story on almost any measure. The sector has created a world-class export industry which has enabled individual universities to ascend global rankings, resulting in Australia punching well above its weight on the global stage.
The Dawkins model was overdue for review. The report of the Universities Accord Panel, published early in 2024, represents a blueprint for a very different kind of system – one that will become much larger over time, that will be more planned and managed in ways that will see tighter alignment between national skills needs and higher education provision. The Accord blueprint outlines a scenario where the boundaries between different types of post-secondary education will become blurred. The Accord will address and acknowledge the different needs of different students and institutions, and will work towards an education environment that could see the emergence of more specialised institutions.
Second, there is likely to be increased interest in exploring various forms of transnational education (TNE), whether through third party delivery, offshore campuses or online, to avoid the need to bring students into the country at all. Those universities already with physical offshore campuses are likely to be best placed to take advantage of this new environment. There are challenges associated with TNE, such as quality assurance, lower rates of return, difficulties repatriating revenues, and the possible loss of distinctiveness for Australia’s universities in a global marketplace. Each university will need to consider its options in this new environment.
Third, universities will need to reconsider their research strategies. Research is well known to be a loss-making activity (whether externally funded or supported through workload allocations), and has been sustained for the last two decades by cross-subsidy from international revenue. With the likely reduction in cross-subsidy, remaining funds will need to be targeted more carefully. This means all universities, including the GO8, will need to give serious consideration to focusing their research effort through strategies of specialisation and differentiation.
Fourth, the government’s new policy framework links expanding international enrolments with providing additional student accommodation, which means universities may need to reconsider their investment priorities. Much will depend on whether the costs incurred to build new accommodation can be offset by increases in future revenue, or whether other investments will be more productive.
Finally, it may be that the financial stress on universities will lead to discussions about mergers as a way of assuring financial sustainability. We are entering a new era of university funding with profound implications, comparable to the changes from the Accord.
