A useful piece by Catherine Armitage in The Australian yesterday discussed the $1.7 billion extra being paid to universities from the budget on top of the $5 billion endowment fund for capital works. The capital works endowment fund is worth annually the interest cost foregone on this allocation or around $250-$300 million. The $1.7 billion figure comprises the more crucial increase in publicly-funded university benefits.
Of this increase $557 million will go in higher funding per student place over 4 years. This almost meets the AVCC's call for an increase of $500 million per student place over 3 years.
The biggest increases go to mathematics and statistics and clinical psychology ($2729), followed by allied health ($1889) and medicine, dentistry and veterinary science ($1081).
The losing discipline group is my area of business (accounting, administration, economics and commerce) which loses $1030 per place. It now receives $1674, equal to law. With levels of per capita support of only $1674 annually universities teaching these discipline areas have been partly privatised.
Education Minister Bishop is quoted as saving “the change reflected the higher salaries that graduates in those disciplines received over a lifetime. Universities were free to decide whether they would raise the fees for these disciplines”.
These per capita funding levels therefore seemed to be based on equity considerations with respect to future salaries. The theory is that if these future salaries are judged to be high then students can take on more HECS debt to fund their programs.
Economics units increase in cost by $1030 annually while the costs of possibly substitute areas decrease by up to $2729 annually. Assuming these changes are translated into offsetting moves in HECS fees – there is every indication they will - disciplines like economics, that have been doing well but not that well with their enrollments Australia-wide, face a hefty, relative price increase for their programs.
For particular universities such as my own which recruit among their students many with low family incomes this change can be expected to have significant effects on enrollments.
Moreover, the change seems to be equity not efficiency-driven. High salaries for graduates from the business areas reflect skill shortages that are not experienced in some of the other areas receiving much higher per capita funding. In some of these latter areas enrollments are currently declining. In economics it is now extremely difficult to recruit research ot teaching staff. In areas such as finance it is becoming almost impossible to recruit local postgraduate students. Employers from the public and private sectors are desperate for graduate students in economics and accounting.
The current per capita funding moves will thwart the market-driven processes that are acting to increase numbers of students studying in these areas. The moves will reduce the net economic benefits generated by universities for the community.
Business graduates generate over 3 times the economic benefits from an undergraduate degree than are generated by tertiary undergraduates overall. Moreover, student/staff ratios in business areas are often among the highest in a university.
I am not opposed to areas such as mathematics and statistics achieving increased funding and generally receiving subsidy support. I do think however that this support should be additional to pre-existing levels of support to other areas. This would alter relative prices between business and non-business degrees but by less than has occurred with the present policy.