The demand-driven system is among the great reforms in the history of higher education.
It carries forward an important national project enjoying bipartisan support since the Menzies government – increasing access to higher education to broaden opportunities and build national prosperity.
The achievement is remarkable. In the early 1970s, just 3 per cent of Australians held degrees. By 2012, 37 per cent of Australians aged 25 to 34 held at least a bachelor’s qualification.
The expansion of the university system has transformed life for millions of Australians. As economist Amartya Sen argues, giving people capabilities allows them to create lives of opportunity, freedom, security and meaning.
More places on campus matter for all those first-in-family students – the authors included – who were able to participate in higher education. A university education means more satisfying jobs and a higher standard of living for graduates. And it carries profound inter-generational consequences. Children from families where parents hold degrees are four times more likely to go to university. The task is far from complete, but about 145,000 students from low socio-economic families now study at an Australian university, thanks in part to the demand-driven system. Such access shares opportunity for individual liberty and family prosperity.
The benefits are felt by the nation too. Rising degree attainment matters for productivity. As in all developed countries, business needs higher skill levels in the workforce. The economy requires university graduates – studies show a majority of jobs are created in occupations usually requiring a degree. Moreover, Access Economics predicted that Australia faces a cumulative graduate shortfall of 370,000 by 2018.
Half a century of policy innovation – the expansion of universities under Menzies and Whitlam, the introduction of HECS under Hawke and Keating, the growth of research funding under Howard, and the demand-driven system under Rudd and Gillard – has created a rare virtuous circle: more participation, greater opportunity and higher productivity. Economic and social goals – so often in conflict – reinforce and invigorate each other in higher education.
The demand-driven system is also an important motion toward deregulation of universities. Instead of centrally allocated quotas of students, the demand-driven system allows universities to choose their own profile (within some constraints). It is the first step toward greater specialisation, as each institution creates a profile of courses that works for its aspirations and communities. As a result of the system, at least seven institutions have substantially restructured their offerings to reflect demand – reducing unpopular courses and investing in areas where their institution has a strong reputation.
Meet the needs of students
The timing is important. The online revolution and sharp international competition require universities to be responsive. Giving institutions more control over their mix of courses and degrees encourages innovation. The demand-driven system, like no other policy lever, encourages universities to meet the needs of their students.
The new federal government announced a review of the demand-driven system, but within a clear context of support for the general approach. The sector listened carefully to the words of Prime Minister
Mr Abbott spoke proudly of this history of growing opportunity; of Sir Robert Menzies sparking the expansion in participation, “one of the main legacies of his long tenure"; and of the 63 per cent increase in the number of students under the Howard government.
He also offered an important conclusion: “A period of relative policy stability in which changes already made can be digested and adjusted to (such as the move to demand-driven funding) is probably what our universities most need now".
This is the context for reviewing the demand-driven system – fine-tuning rather than a sharp break.
Hopefully the review by David Kemp and Andrew Norton will address the challenges of a system in which bachelor degrees are demand-driven, but sub-bachelor programs – vital to bridging the gap between school or mature experience and university – remain controlled. All universities need more scope to offer post-graduate degrees, ever more important for a skilled workforce.
The review could also ask questions about funding for university places. With government funding per place already below international standards, there is a need for more investment.
Yet the Treasurer has stressed the constraints on his budget choices. Thinking afresh about fee flexibility could be an important step to ensuring Australia remains internationally competitive.
Public policy is always the art of the possible. The compromises necessary for change mean no policy is perfect, including the demand-driven system. As a first approximation, it has achieved much; with refinement, it can be the foundation for a stable, long-term, independent higher education system. A review is a sensible next step to retain the benefits and improve the outcomes from greater participation in higher education.
Regardless of what fine tuning emerges from a review, we must not break bipartisan commitment to one of our nation’s great achievements – equal opportunity and rising national productivity through quality university education.
The Australian Financial Review