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Bills Digest No. 9  1998-99
Higher Education Legislation Amendment Bill (No.1) 1998

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Date Introduced: 1 July 1998

House: House of Representatives

Portfolio: Employment, Education, Training and Youth Affairs

Commencement: Royal Assent

Purpose

To make amendments to the Higher Education Funding Act 1988

• to vary the maximum amounts of grant that can be made to higher education institutions under a range of grant categories: and
• to enable the Minister to determine the maximum amounts payable by the Commonwealth to promote Australian education and training services overseas.

Background

The higher education system is funded on a calendar year basis under the provisions of the Higher Education Funding Act 1988. Funding is provided on a rolling triennium basis, which means that the level of funding is known for the next three years. This provides greater certainty to institutions and enables better forward planning. Although some see triennial funding as a strength of the current system, others argue that in future it is likely to act more to insulate universities from student demand and the need to be innovative and competitive, than to protect the quality of higher education.(1)

Cost supplementation is another feature of current education funding, whereby grants are adjusted to cover increased costs. This Bill appropriates funds for 1999 and 2000, and provides supplementation for price movements and additional superannuation expenses incurred by institutions in 1998.

The Commonwealth funds institutions for a maximum number of student places. The level of Commonwealth funding is negotiated between the universities and the Department of Employment, Education, Training and Youth Affairs (DEETYA). This framework for financing higher education was criticised in the Final Report of the West Committee's Review of Higher Education Financing and Policy which was published in April 1998. Under the heading 'The Way Forward' the Committee stated that:

Instead of the perverse incentive structures, inflexibility, restrictions on competition and entry into the market, and the poor access of Australian institutions to finance, we need a financing and regulatory framework that:

responds to students' preferences about study options and the location, content and mode of delivery of education, and provides high quality learning experiences which meet the particular needs of individual learners;

• protects students and taxpayers and is accountable to students and taxpayers for the investment that they make in higher education;

• facilitates effective investment by the Government in research and research training; and

• enables Australian universities to become major players in a world-class education industry that can play a direct role in driving the growth of our economy.

Our conclusion is that fundamental reform is needed in the funding of teaching and research and in the way that government supports higher education as an industry.(2)

The Committee recommended a funding model where the number of students for which a university receives funding would be determined directly by student choice, rather than by negotiations between universities and DEETYA. In public comment which followed the release of the Committee's Discussion Paper the model of student centred funding was referred to as 'vouchers'.

Although the Government has yet to make its formal response to the West Committee's report, the Minister for Employment, Education, Training and Youth Affairs, Hon Dr David Kemp MP, said in a Press release dated 12 November 1997 that 'the Federal Government had no intention of introducing a voucher system for universities'.(3)

Current Levels of Funding

The major decisions for funding higher education for the current three year period were announced in the 1996-97 Budget. This reduced the forward estimates for higher education operating grants by 1 per cent in 1997, by a further 3 per cent in 1998 and a further 1 per cent in each of 1999 and 2000. The maximum grants for general teaching and research purposes will decline in 1999 and 2000 as follows:

1995	3,652 million
1996	3,803.5 million
1997	3,855.5 million
1998	3,859 million
1999	3,260 million
2000	3,120.5 million

In addition to operating grants, the total revenue available to higher education institutions includes students' contributions through the Higher Education Contribution Scheme (HECS), revenue from fee-paying students, capital grants, and funds from research and development, investment earnings, donations and bequests. In 1997, the total revenue available to higher education institutions from all sources was estimated to be $8.4 billion. This is forecast to increase to $8.6 billion in 2000.(4) Higher education programs are described in detail in the Department of Employment, Education, Training and Youth Affairs publication, Higher Education Funding Report for the 1998-2000 Triennium, published in December 1997.

Overseas students

The Commonwealth has been encouraging universities to develop full fee services for overseas students since 1985, when a full fee program was introduced alongside a limited program for part-subsidised overseas students. The former Government's view was that overseas student services should be treated as an education export, except where scholarships would advance government aid or international objectives.(5)

The total number of overseas students in Australia has grown from around 21,000 in 1988 to 140,000 in 1996. In 1996 it was estimated that international students contributed over $3 billion to the Australian economy, an increase of nearly 50 per cent in just two years.(6) The Government estimates that the total number of overseas students studying in Australia is expected to rise from 151,464 in 1997 to 181,000 in 2001 - a 19.5% increase. This is expected to increase total revenue from overseas students by 39%, from $3.22 billion in 1997 to $4.49 billion in 2001. (7)

The Australian International Education Foundation (AIEF) was established in 1994 as a government-industry partnership. Its role was, in part:

• to establish a broad range of Australian international education, training and research activities and
• to develop a marketing strategy to enhance the perception of Australia as a major contributor to and provider of high quality education, training and research internationally.

The AIEF was financed through a Trust Fund. Contributions to the Trust Fund were initially on a 2:1 government to industry basis. This was reduced in the 1996-97 Budget to 1:1 for the two years 1996-7 and 1997-8, and the Government allocated $3 million for each of the two years. The Government also foreshadowed withdrawing all funding from the program by 2000-01.(8) The universities were dissatisfied with the AIEF and in 1997 most did not pay their full subscriptions to the Trust Fund.(9)

In 1996 the Allen Consulting Group was commissioned by DEETYA to review the role of the AIEF and to provide an assessment of the appropriate roles for government and the education and training industry in facilitating further growth in education and training exports. The review was completed in 1997.(10)

On 11 May 1998, the Minister for Employment, Education, Training and Youth Affairs, Hon Dr David Kemp MP, announced that the Government would provide $21 million over the next four years for an international marketing campaign to promote Australia's education and training services overseas.(11) The amounts in this Bill total $7.367 million for three years 1998-2000. According to press reports the $21 million does not represent net extra spending - it has been taken from other higher education areas, including the Australian National Training Authority national project funds.(12)

Dr Kemp also announced that the marketing campaign would focus on traditional Asian markets as well as relatively untapped student markets such as India, China, Europe and North and South America. It would help to minimise the impact of the Asian economic crisis on the number of overseas students studying in Australia.(13)

At the same time Dr Kemp said that the AEIF would be renamed Australian Education International (AEI). It would be more fully integrated with the operations of DEETYA and wholly funded by government. Its role would be to act as a link between the overseas promotion of Australian education and training and the broader Government objectives for foreign affairs and trade.(14)

Main Provisions

Item 1 of Schedule 1 changes the heading of Chapter 2 of the Act from 'States Grants for Higher Education Assistance' to 'Grants for Higher Education Assistance'.

Item 2 amends Section 17 of the Act which sets the maximum level of funding grants payable to higher education institutions for operating purposes in a given year. Operating purposes is defined in section 3 and includes the general teaching purposes and general research purposes of the institution, the provision of courses of continuing education, and the purchase of equipment and minor building projects associated with general teaching and research purposes. The proposed amendment reduces the maximum level of grants payable in 1998 by $1 million from $3,860 million to $3,859 million, and legislates amounts of $3,260 million for 1999 and $3,120.5 million in 2000.

Item 3 amends Section 20 of the Act which provides for grants to institutions for superannuation expenses. The amendment increases the maximum amount payable for 1998 by over $5 million from $103.6 million to $108.7 million, and inserts amounts of $112.7 million in 1999 and $116.3 million in 2000.

Item 4 deals with grants to open learning institutions and ceilings on those grants. A maximum amount of $221,000 is proposed for each of 1999 and 2000, compared with $218,000 in 1998.

Item 5 amends Section 23C of the Act which operates to limit the amount payable for an aggregated group of grants. The section caps the total cost of grants made under the following categories: national priority, innovation, promotion of equality of opportunity, special research assistance, advanced engineering centres, and co-operative multimedia centres. An additional $6 million is available in 1998, up from $475 million. A consolidated amount of $466.5 million is prescribed in 1999 and $395 million in 2000.

Item 6 amends Section 24 of the Act which provides for grants payable to teaching hospitals attached to higher education institutions. The proposed amendment increases by $1,000 the maximum amount payable for the year 1998, and prescribes an amount of almost $5 million for each of the years 1999 and 2000.

Item 7 amends Section 27A of the Act which provides for grants for special capital projects. The amendment increases the maximum amount available in 1998 by $9,000 and prescribes an amount approaching $39 million for each of 1999 and 2000.

Item 8 deals with expenditure on the international marketing and promotion of education and training services provided by Australian institutions. The proposed amendment is inserted in Section 27 which enables the Minister to issue guidelines relating to expenditure on special purpose projects. The proposed new section 27D allows the Minister to determine the maximum amount payable by the Commonwealth for the international promotion of Australian education and training services. In 1998 this amount is to be $1.016 million, increasing to $2.468 million in 1999 and to $3.883 million in 2000.

The amendment proposed by Item 9 has the effect of providing for the Minister to table in each House of Parliament, determinations of the maximum amounts payable by the Commonwealth for international promotion of Australian education and training services.

On 1 January 1998 the name of the University changed from 'James Cook University of North Queensland' to the 'James Cook University'. The University is established by an Act of the Queensland Parliament and the name change was part of the James Cook University Act 1997 (Qld) which commenced on 1 January 1998.(15) This Bill amends the Employment, Education and Training Act 1988 (Item 1) and the Higher Education Funding Act 1988 (Item 2) to reflect the change in the University's name.

Endnotes

1. Learning for life: final report, Review of Higher Education Financing and Policy, April 1998, Dept of Employment, Education, Training and Youth Affairs, Canberra, 1998, 114.
2. Ibid, 21-22.
3. 'Education and training vital for our future', Dr David Kemp MP, Press release K76/97, 12 November 1997.
4. Higher Education Funding Report for the 1998-2000 Triennium, Department of Employment, Education, Training and Youth Affairs, 1997, 1.
5. The Australian International Education Foundation: Review of the government-industry partnership, consultancy report to the Department of Employment, Education, Training and Youth Affairs by the Allen Consulting Group Pty Ltd, March 1997, 12.
6. Ibid, i.
7. '$1.2 billion growth in education export industry', Dr David Kemp MP, Press release K33/98, 11 May 1998.
8. Portfolio Budget Statements 1996-97, Department of Employment, Education, Training and Youth Affairs, Program BM75, (Budget Related Paper no. 1.4), 157.
9. 'Reduced AIEF gets green light', Australian, 21 January 1998, 37.
10. The Australian International Education Foundation: Review of the government-industry partnership, op cit.
11. '$1.2 billion growth in education export industry', op cit.
12. 'Govt backs foreign student boom', Michelle Grattan, Australian Financial Review, 12 May 1998, 8. and 'Reduced AIEF gets green light', Dorothy Illing, Australian, 21 January 1998, 37.
13. '$1.2 billion growth in education export industry', op cit, 1.
14. Ibid, 2-5.
15. James Cook University of North Queensland, Annual report 1997: the year in review, Townsville, 1998, 60.

Contact Officer and Copyright Details

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ISSN 1328-8091
© Commonwealth of Australia 1998

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