Higher Ed at the Ballot Box: Australia’s Election and the Accord with Andrew Norton

Alex Usher: Hi everyone. I'm Alex Usher, and this is the World of Higher Education Podcast. It's been about 18 months since the podcast last visited Australia. The story at the time was about something called the Universities Accord, an oddly named expert panel report, which was supposed to give the labor government a roadmap for restructuring a higher education system, widely believed to be under enormous stress.
Since then, lots has happened. There's been an international student visa controversy, a whole ton of cutbacks at institutions, including a quite wild poly crisis at Australian National University. And there was a general election which saw the Labor Party unexpectedly return to power with an increased majority.
So what's on the agenda now? To answer that question, we called upon longtime podcast friend Andrew Norton, currently Research Fellow at the Center for Independent Studies and Policy and Government Relations Advisor at the University of Melbourne.
As usual, he's here to give us the straight dope from down under. Our discussion ranges pretty widely over developments over the last 18 months, and to me, the most interesting question is why the government's been so slow to move on some key aspects of the Universities Accord.
Andrew's answer to that question is, I think, pretty revealing and should resonate both in Canada and the UK. Quite simply, left-wing governments aren't as different from right-wing ones as you might think when it comes to delivering change in higher education. But enough for me. Let's listen to Andrew.
Alex Usher: Andrew, welcome back. Last time we talked was about 18 months ago, and the Universities Accord report document, I'm not sure what to call it, had just dropped and there were a whole bunch of recommendations about funding and job ready graduates, and access, system regulation. Something strange about a national regional university.
Labor had about a year to do, you know, to move year and a half between the time the report dropped and the election this last May, what did they do with that time? What aspects did they move on most quickly?
Andrew Norton: It was a bit of an odds and ends approach to it. The big expansive changes to the the way students are funded and the way institutions are funded has really been postponed. But they've done a range of things. They've introduced a national student ombudsman, so the first national complaints organization that students can have.
They've introduced a new system of funding people in preparatory courses. They have increased regulations on universities to support students who are struggling, at risk of failing their subject or their course. Mostly they've done things that are really aimed at helping students with the big structural work yet to be done.
Alex Usher: So they did the cheap stuff.
Andrew Norton: Essentially, things that cheap to them and or inflicted costs on the universities but not the government.
Alex Usher: And, and so the rest of the elements there, did they actually say no to any of them or did they were like, they said, you know, we're not gonna do that? Or did they just sort of leave it quiet? Maybe we'll do it, maybe we won't.
Andrew Norton: The thing that they're attracting most criticism for is the, the job ready graduate student contribution. So, the previous government in 2021 radically redesigned the way students pay for their education. And this was designed to encourage people to do courses the government wanted to do, like teaching on nursing by discounting the student fees, and increasing student fees in courses the government regarded as say, not job ready, such as humanities and social sciences. So the court final report said, yes, this system should change. It should go back to something more like what we had before where there's a rough relationship between your fees and your likely future earnings.
But the government has deferred this to this Australian Tertiary Education Commission, which currently exists as a website, but doesn't have any legislation. The legislation probably happen early next year. It will investigate this, you know, at earliest possible date. I think for changes to, this is 2027, quite possibly later.
So the government's still getting a lot of criticism for, you know, saying while this, the original fees were being increased, that it was a bad thing and they'd fix it, yet they're procrastinating first they set it off to the the Accord review, then off to ATEC, and then who knows when it's actually gonna happen.
Alex Usher: So there's a lot of kicking the can down the road at at a time when institutions are having some trouble financially.
Andrew Norton: That's true. So a lot of institutions are in the process of reducing staff, cutting courses. Exactly why this is happening is I think, a little bit unclear. Some of them are still struggling with international students. Some of them are struggling with numbers of domestic students. But I think the key problem is their, their costs are simply increasing more than their revenues.
So they've signed up to wage deals, which are, you know, well above inflation. Yet their government grants are indexed inflation, essentially. So I think they're in a situation where they have to control their costs and staff numbers and courses are one of the few, few ways left that they can continue to do that.
Alex Usher: So you mentioned international students and, and one of the things, you know, that we've noticed here in Canada, 'cause we went through the, the same thing a few months before you did was this whole notion of international students caps, right? And, it was similar both because people wanted to cap and because it was because of a perception, I'm not sure how true it was that international students were affecting the housing market. And both labor and the opposition, I think, were in favor of these caps. They just disagreed about how severe they should be. So what's actually happened on that front? Are there caps and, and how are they regulated?
Andrew Norton: I think the answer is: sort of. So, the background is, probably the second half of 2023, the government realized the international students, or started believing the international student numbers were contributing to shortage of accommodation in Australia and increasing rental prices. And I'm one in the sector that thinks there is something to that, that we add up all the students, all the ex-students on temporary graduate visas, all the people on bridging visas, it used to be students trying to get some other visa, we're probably looking about a million people in a population of about 27 million. So I think it defies credibility to say that doesn't have any impact on the labour market. The government did a whole range of things on the migration side to make it more expensive, to get a visa, to make it more difficult to get a student visa in the first place. This wasn't really working on the Chinese students, were the biggest single group in Australia. And so in May last year they introduced legislation that would've put formal caps on the number of students at each university and each other education provider could take. And we all thought this was certain to pass because the opposition also supported the idea of caps. And at a big surprise last November, for various reasons, the opposition decided to not support this. And so in combination with the, the Greens party it could not get through Australia's Senate, it did not become law.
Instead, what the government did, it essentially recycled the caps that they'd already announced at something called the national planning level. One definite feature of it was that once the institution reached 80% of that number, further visa applicants would go into a go slow lane. But I thought with the implied threat that if you did go over it sometime in the future there would be a way of essentially punishing the institution for doing that. Now that hasn't happened. So I think now we're back to essentially a migration driven set of restrictions in international numbers.
Alex Usher: Hmm, I, last thing before we get to the election, there was a really interesting article, I think it was in the Times Higher you know, about the idea that universities had nobody in their corner going into the election that they'd lost some of the social license they had in previous times. You know, part of it was about the very large vice chancellors salary packets, which has been an issue for a long time, right? A lot of the presidents earning over a million or more. Uh, but there's been these persistent stories about wage theft, about universities systematically underpaying some or all of their employees. And, you know, management gone mad and cuts and, and this has been quite a, a thing at Australia National University. Is that true? Are universities more friendless in Australia than they used to be? Or is this you know, or is there something really different this time?
Andrew Norton: I think there is something different this time. It's really not just that the, there have been a lot of issues. So the, the wage theft, as it's called by the union here, essentially this has resulted from the universities increasing the number of casual or sessional employees. There are complex payroll issues here with different rates for different activities.
It is genuinely hard, but it does seem like the almost every university has failed to align its payroll systems with the reality of the way it employs people. As a result, I think it's now it's about half the institutions have had to repay people for or pay people the correct wage, having failed to do so first time.
I think about half a dozen of them have fairly high level enforcement by the, the workplace authorities against them, and so they're kind of with traditional rogue employers, like in retail. We don't necessarily always do it the right way in Australia. And I think sort of the, the symmetry of not paying fully people are already on very low wages, while vice chancellors get paid a million dollars plus a year. That just doesn't look good. I think the real big change here is I think the liberal part of the opposition has been skeptical of the unis for quite some time. Where I think unis are shocked is that the, the governing labor party seems to have taken the Liberal view and, and, if anything, has been even more harsh with the universities than the previous government was.
I think the university, that's why they're in shock. They expected that after a change of government in 2022, their lives would get easier, and that certainly hasn't been the case.
Alex Usher: Yeah. Okay. We're gonna take a short break. We'll be right back.
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Alex Usher: And we're back. Okay, so now we've got, let's talk about the election. Your election was only about a week after ours in Canada, and it seemed it was a very similar kind of story. A weak center left government on course to be crushed by a right wing government that, by a right wing party that suddenly didn't seem so cuddly after Trump had been in office for two or three months, right? I think the difference though is that higher education actually played some role in the Australian election. How did, what was the, what were the promises the different parties made?
Andrew Norton: I would say this is quite unusual, that usually higher education is not an election issue in Australia, but this time Labor, picking up on discontent over student debt in its first term, and that had been driven by the fact that we index our student debt to inflation. And in Australia, like in a lot of other countries, there was a post COVID inflationary period, which caused indexation to be quite high, about 7% in one year.
And I think this actually triggered what I call a latent issue. That, you know, over the 2010s there's been a big increase in the number of students, corresponding big increase in the number of debts. We had about 3 million people with student debt, over $80 billion Australian outstanding. This is actually a very large constituency, and I think Labor had realized that if we, this was painful for us in the first term, maybe we can turn this into a positive.
And they did what it's been discussed in the US or has done in the US, which is that they'll cut all these debts by 20%. That to me, they announced that in November last year. In the campaign, they didn't really push it hard until the last week when they really focused, last week at the campaign, until they really focused on it.
And partly what we've gotta explain here is that there was a late surge in support for the government, which led to their very large majority. I guess my theory is that the 20% cut to the debt, which is worth more than $5,000 to the average person with a student debt, that was probably enough to swing people over the line and give Labor its big majority.
Alex Usher: So what I found odd about this was that, yeah, so, but debt doesn't actually affect your payments in Australia. 'Cause you have, you know, one of the purest and the original income contingent system in the world, right? So, cutting debt by $5,000, that reduces the, the length of time you will pay, right? So, so now my debt will be paid off in 2050 instead of in 2055.
I'm amazed that that would move the needle so much, 'cause next year what they, what everybody pays is a function of their income, not a function of their debt. So how did that work?
Andrew Norton: I think because this had become so salient in people's minds, the strange thing was that they also had at the same time a promise to change the repayment system in ways that would actually reduce how much they repay this year for the laws already operating now. But that got almost no airtime. When journalists rang me, I said, do, do you want me to talk about this as well? What's that? There was zero recognition of it, not played up. And I think one of the reasons for that is the change is not straightforward in the sense that while the average person'll repay less, everyone will be on a, on a marginal repayment rate of 47%, if you include the income tax with the, the 15% of their income they have to repay once they're over $67,000 Australian.
So as this comes into operation, I think there might get some political problems, but those, the overwhelming focus, 99% was simply on the cut.
Alex Usher: So, but, so let's actually be clear about that, 'cause that's an interesting one. Australia has always had an income contingent system where there was a threshold below which you paid nothing, but then as soon as you got over that threshold, you paid a percentage of your total income, not marginal income over that threshold. So.
Andrew Norton: So the change is to the marginal income system and the threshold of which you start repaying has moved from 56,000 dollars Australia to 67,000. So a whole lot of people are actually out of the repayment system as a result. This is gonna have negatives as well because more people will find their debt keeps going up through indexation because they're not making any repayments, or the repayments are less than the indexation.
So I actually think this is, this is gonna be a problem.
Alex Usher: What's the marginal rate over that?
Andrew Norton: So it's 15% above the 67, and then it goes up to 17% at $125,000 a year. And those numbers are high
Alex Usher: That's
Andrew Norton: once you set a high threshold, you've gotta have it high to sort of raise a reasonable amount of revenue for the government in repayments.
Alex Usher: Right. Okay. So now that Labor has been reelected, what do you think their agenda looks like for the next three years? Which parts of the Universities Accord that they passed on, you know, last year, are they actually gonna move on? I think you've made a couple of, of mentions about the job ready graduate program and the, and the regulator. Anything else?
Andrew Norton: One thing they've already done, which is kind of thematic with the, the earlier stuff, is some new legislation on what they call gender-based violence. So it's gonna be quite complex regulation for the sector to manage. The big thing we're looking at is how they're going to distribute student places in the future.
Their general mantra is something called managed growth. And what they're trying to do here is go back to a system where they've got a lot more control over the number of student places at each university, and I suspect also much more control over which courses those places are allocated to. So at the moment there is a, a maximum grant that universities have, but outside from, you know, niche areas like medicine, there's effectively no control on how you allocate that internally.
And even though you are sort of, you'll use up all your public money to a point, you can still enroll more students if you're prepared to take the student contribution alone. And some universities have been quite happy to do that.
Alex Usher: Right. And that's very similar to, to what we have in Ontario here. Yeah.
Andrew Norton: So the universities that are currently what we call over-enrolled, you have got more students that they're being fully funded for. I think they are feeling a bit vulnerable and some of them will find this very, very difficult to manage.
Alex Usher: So the government is, wants to control domestic student numbers, through this mechanism and they, and effectively they're gonna do something similar for international students through a system of caps, perhaps. Are they gonna move on caps again and, and will it be in line with this whole notion of managed growth?
Andrew Norton: I think so, yes. So this, this Australian Tertiary Education Commission, they say we'll do this regulation of international student numbers in future, at least in, in the university sector. And so there'll presumably be some coordination between the two totals. In the past there's been discussion of saying that international students should be no more than X percent of your total enrollments.
Something some universities already do voluntarily, and so I would not be at all surprised if there was some maximum percentage of international students permitted.
Alex Usher: Right. Okay. But so it's interesting that you mentioned growth because I think we've just been talking about how difficult it is for universities to balance their budgets. If there's no new money either from domestic sources or international students, how are they gonna grow? I mean, I, I just saw, I think it was today, the, the news that University of Melbourne is is giving up, it's building a new second campus.
Andrew Norton: That is partly due to problems with the particular site that they have been.
Alex Usher: Okay.
Andrew Norton: Working on. So at the moment we've got quite a mixed, I should, should backtrack. So when they say managed growth, this doesn't actually necessarily mean growth, but they were using, they were using that for their international students as well, when clearly the one to reduce the number. So it was managed degrowth rather than managed growth.
So. What they do want over the long run, and this comes from the Accord, is that a higher percentage of people, particularly from disadvantaged backgrounds acquire a university degree. And so they wanna achieve the growth required to do that. The difficulty we've got is the school labour market on my analysis is probably recovering from a period where it was flatter than normal.
So I think the unis that rely on school leavers are probably most of the unis that have been managed to over enroll. But the mature age market is in a long slump, apart from a brief spike during COVID. And I think that that market is not going to fully recover. And that's because I think this cohort has already received their bachelor degrees at an earlier age and therefore will not fully go back to what it was in the past.
Alex Usher: Right. So with all that, with all those kinds of restrictions that are now being placed on institutions you know, they can't get foreign students, domestic students are slumping, government funding generally is, is slumping. What do you think the system looks like five years from now? Like by, by 2030 say, is this a, is this a sector that's found its mojo again somehow? Or are we looking at long-term decline?
Andrew Norton: I don't think it's as bad as it looks in some other countries, whether the demographics are worse than in Australia, but I do think that 2020s will continue to be a difficult period, and we have been able to discuss the potential kind of structural changes around the labor market and ai, which may devalue a degree, and that could cause, you know, shocks in the system, which we're yet to see.
Now, higher ed has survived numerous ups and downs in the labor market over decades now, that, that usually the drop offs are short term and then they return to growth. But, you know, maybe this time is different. I'm not sure. I don't think we're seeing huge effects of AI in the numbers for inter well either international or domestic students right now, but I'd say it's definitely possible once we start getting negative labor market information that new graduates are really struggling to find work.
Alex Usher: Andrew, thanks for joining us on the show.
Andrew Norton: Thanks Alex.
Alex Usher: And it just remains for me to thank our excellent producers, Sam Pufek and Tiffany MacLennan, and you, our listeners and readers for joining us. If you have any questions or comments about today's episode or suggestions for future ones, please don't hesitate to get in touch at podcast@higheredstrategy.com.
Join us next week when Marcelo Rabossi from the Universidad Torcuato Di Tella will be joining us again to talk about new developments in the financial crisis in Argentina's universities and the new showdown between Congress and President Javier Milei over new higher education law. Bye for now.