Society

Education

At what cost
University fees have never functioned as a price signal in the way the government is anticipating

Image © Brendon Thorne / Getty Images

Australia’s universities were told often that the boom times – driven by an unprecedented 260 per cent growth in international student revenues since 2009 – wouldn’t last. But even the most pessimistic of doomsayers could not have predicted COVID-19. Even with substantial reserves, most universities will struggle to absorb the $16–18 billion the sector will lose by 2023–24.

What the universities need now, if not love, is policy and cash. Instead, they have Dan Tehan, Scott Morrison and Josh Frydenberg. Different stewards at the helm might have incorporated the universities into their stimulus plans. Instead, the government wrote special rules to exclude universities from the JobKeeper payment, before granting exemptions to four private universities (Notre Dame, Bond, Torrens and Divinity) on the bizarre basis that they’re less reliant on public funding.

Then came Friday’s proposal that student fees for certain courses (humanities, law, management, communications and social sciences, which are generally cheaper for universities to provide) will dramatically increase and in some cases more than double, while fees for other courses (sciences, engineering, nursing, teaching, agriculture) will be reduced. The rationale is the price signal, regarded by this government as sacred unless it’s applied to carbon emissions: Tehan wants more students getting “useful” degrees, and he assumes school leavers will make their decisions based on the cost of degrees.

It’s an interesting idea, even if it does smack of the kind of market-meddling that Liberal MPs normally associate with socialism. But if the tumultuous history of university fees provides any lessons at all, it’s that fees have never functioned as a price signal in this way.

Convinced that fees functioned as a barrier to students who couldn’t afford them, Gough Whitlam and Kim Beazley (senior) scrapped them entirely in 1974. Of course, there had been more than a few sons and daughters of the working class who’d been educated during “the years of unleavened bread”, as Manning Clark described the Menzies era, under the old Commonwealth scholarships scheme from 1951.

The fondness with which people educated between 1974 and 1989 recall that period has elevated Whitlam to the status of Labor folk hero, and it’s not all myth-making. This is the generation of late boomers and gen Xers that still largely rules the government benches, and which subsequent generations of indebted students regard with envy that spills into outrage whenever fees are raised.

With control of both houses following Whitlam’s dismissal, Malcolm Fraser had tried to reintroduce fees for postgraduate degrees, but backed down in the face of a nationwide student strike. Then on 15 April 1987 in The Australian, Sydney University professor of accounting Murray Wells suggested a “graduate tax” that would recoup some of the public funds spent on students. John Dawkins, education minister in Bob Hawke’s government, was interested. He asked Neville Wran, the recently retired NSW premier, to investigate, and Wran came up with something called a “higher education contribution scheme”. Graduates would be taxed 20 per cent of the average cost of their degree once their incomes reached a threshold.

Wran and Dawkins sold HECS to Australia as an extension of the principles that guided Whitlam’s reforms: improving access for under-represented demographics, and expanding universities’ capacity to enrol more students. Students in 1988 and 1989 didn’t buy it. They saw Dawkins flogging the same neoliberal catalogue that had seen unions neutered, the dollar floated and the financial industry deregulated. And they didn’t want to pay. Campuses erupted in protest.

But Dawkins had a point. In 1982 (eight years into the free education era, and the most recent year for which Wran had data), 43 per cent of professionals’ children went to uni, compared with only 9 per cent of children of “unskilled” parents. In other words, Whitlam’s free education was redistributing tax revenues upwards, benefiting people who would augment the advantages of their birth with qualifications that would enhance their earnings by hundreds of thousands of dollars. In some ways, Menzies’ scholarships had been more equitable. It’s not often recalled now that the National Union of Students had actually raised this objection as part of its initial opposition to free tuition.

HECS was a world-first, interest-free student loan whose repayment was contingent on income, not despite it, and whose value was just a fifth of the total cost of a student’s degree, in recognition that most of its benefits would yet accrue to society at large. Dawkins drove HECS through factional and then social opposition. But he won the day, in part because HECS was tied up in a package of reforms that promised universities nearly an extra billion dollars and 40,000 students. In return, universities were compelled to reorganise their management in line with Hawke’s earlier “reform” of the public service. This is where the current structure originates, with its vice-chancellors and deputy vice-chancellors and pro-vice-chancellors and deans and its endless data collation and reports to funders. The neoliberalism of the Dawkins revolution is nowhere better evidenced than in the stultifying managerialism of university executives.


The modern history of university student fees can be divided into distinct “Labor” and “Liberal” periods, with the demarcation point being John Howard’s election in March 1996. Unconstrained by any imperative to redistribute, Howard unleashed the culture war that generations of young Liberals had trained for since he was at Sydney Uni in the wake of Khrushchev’s speech to the 20th Congress. His and subsequent generations of Liberals saw campuses – and humanities faculties specifically – as controlled illegitimately by cabals of Marxists and other labour-movement fellow-travellers. Howard wanted to smash student unions and slash public spending, at least for people who weren’t going to vote Liberal. Tehan, Morrison and Frydenberg are still fighting this culture war.

Howard hiked up HECS fees for what he reconceptualised as “Commonwealth-supported” places, allowed universities to charge full fees from students who had missed out through the Tertiary Entrance Rank (TER) system, and declared war on student leaders and activists. Students fought back, loudly but ineffectively. Unlike Fraser, Howard simply wasn’t worried about their protests and strike threats. By the end of the Howard era, unionism was voluntary, funding was down, fees were up, and student debts – like mortgages – were on a steep incline. Howard made much of his record on public debt, which is comparatively easy to service. But his relaxed and comfortable suburbs were hocked to the eyeballs. Universities responded to funding cuts by searching for new markets. This was the beginning of the international enrolments boom.

Fee hikes and HECS (since 2005, “HECS-HELP”) debts, though, had no effect whatsoever on enrolments. By deferring the payment of fees and tying it into the tax system, it turns out that HECS insulates school leavers from the economic dimension of their choices just enough to render it effectively irrelevant. This can be no better seen in the massive expansion of law graduates, to the point that most now can’t expect to find work as lawyers, despite Howard’s elevation of law to the most expensive band of courses in 1996. Less than a fifth of 19-year-olds were at uni in 1989; by 2016 this rate had climbed above 40 per cent and showed no signs of abating. Class sizes ballooned. As TER (then ENTER, now ATAR) scores dropped, so did the quality of education, as universities were forced to cater to more and more mediocre students. This drop in quality became one of the factors that threatened the international enrolments boom before COVID.

The one thing Tehan’s plan won’t do is grant universities more money – at least, not much more – to cover the disappearance of many international students. Increasing “student contributions” by between 28 and 113 per cent simply means that for those courses, students will wear more of the cost of their degrees, and the government less. And while the $54 billion of HELP loans sits conspicuously in federal budget papers as an asset, the government knows that for various reasons – including graduates not making income thresholds – it’ll never see a third of that.

The universities are in uncharted territory. Forced into market reliance like never before, a huge chunk of the market has now dropped out. ATAR has been the only “price signal” that’s ever been demonstrated to influence the choices of school leavers, but so many of them are now entering uni that for most courses, ATAR is practically irrelevant. So perhaps Tehan’s own price signalling will work, after all, to divert students from humanities into the sciences. Of course, if it does, it won’t help universities, which Tehan must be assuming will remain solvent, perhaps by good management, perhaps by luck, perhaps by magic. And it will hardly help Australia to have even fewer graduates schooled in the study of power and its consequences that the humanities provide.

Russell Marks

Russell Marks is a lawyer and an honorary research associate at La Trobe University. He is the author of Crime and Punishment: Offenders and Victims in a Broken Justice System (Black Inc., 2015). 

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