Can we hit the Universities Accord’s ambitious targets?

Education in Australia needs ambitious targets. That is exactly what the Australian Universities Accord has provided, but it is unclear whether they can be met.

Released early this year, the Accord includes an array of recommendations to improve the tertiary education system and increase participation in further education. It aims to have 80 per cent of the working-age population with a Certificate III or above by 2050. While it fits with the intent of increasing the pool of skilled workers, ultimately the target is aspirational, particularly as the focus of the accord is more on reforming the tertiary education system than its expansion.

To put the target into perspective, there will need to be around seven million more people of working age with a Certificate III or above in 2050 than there are today. The attainment rate currently sits at 60 per cent – up from just over 40 per cent two decades ago – and on the current trajectory, the target would be hit.  

Unfortunately, the current trajectory may not be sustainable.

As more of the working-age population attains higher qualifications, each incremental increase will become harder to achieve.

This means greater investment in intervention is required, as harder-to-reach – and typically harder-to-incentivise – cohorts may not respond to standard policy measures, such as subsidised places, fee-free courses or income-contingent loans.

We are already observing a stagnating rate of participation in study at Certificate III and above in recent years across all age ranges. Without a growing pipeline of those studying for tertiary qualifications, the attainment rate would be expected to plateau in the future.

Furthermore, Australia has one of the highest tertiary education attainment rates for 25-64 year-olds in the OECD, as shown in Figure 1 below. To lift attainment levels high enough to meet the target would require Australia to be a trailblazer on the international stage.

Policy measures can only go so far. While the uncapping of university places and a demand-driven university system announced in 2009 initially encouraged more students into university, once built-up demand was met enrolment growth reverted to the average from when places were still capped.

Some of the accord’s recommendations, while commendable, are unlikely to have a material impact on enrolment numbers.

Other recommendations such as supporting underrepresented groups, addressing swelling student debt, expanding access to fee-free preparatory courses, providing financial support for placements and increasing study assistance, will better incentivise studying, but not to the extent required to meet the target.

A focus on cheaper and shorter micro-credentials, creating stronger commercialisation pipelines to allow universities to subsidise more places and expanding income-contingent loans to include Certificate III places in priority areas could help build on these proposed measures.

Nevertheless, the monumental task of reaching 80 per cent requires more ambitious action. This will be costly, and it is unclear who will foot the bill.

The accord recommends substantial increases in funding and a new funding mechanism for universities. It also calls for greater integration with the vocational education and training sector. However, there is no indication where this money should come from to support rapidly increasing student numbers in tertiary studies.

The latest Federal Budget allocates an additional $3.8 billion over the next decade, but this is focused primarily on reforming rather than expanding the system. It includes: support payments for practical placements for students; expanding fee-free access for preparatory and enabling courses; and reducing indexation on student debt.

Even if this entire sum was dedicated to funding new places, it would be wholly insufficient to achieve the required growth, especially considering annual Commonwealth funding for universities is around $13 billion, excluding research.

The budget funding is identified as the first stage of a multi-year reform agenda. The current focus is on cost-of-living relief, creating more opportunity for people in regional Australia and skills reform to boost productivity, but is silent on significantly expanding access to higher education and vocational education and training.

Even income-contingent loans, which typically mute the price signal, may not be enough to increase the uptake of higher education amid the current cost-of-living crisis.

Countries that have historically had free tertiary education, such as Norway, Sweden and Denmark, all have lower tertiary attainment rates than Australia (see Figure 1).

Ultimately, the cost-of-living crisis will ease, but policy should look at ways to further incentivise and support those wanting to study or reskill to meet the changing needs of the Australian labour market.

Given the size of the accord’s ambition, a lot more heavy lifting needs to be done now.