Covid-19 has revealed a crisis in Australian HE governance

The policy to shift the cost of higher education on to students who now won’t be able to get jobs or travel to study is the real crisis here, says Kanishka Jayasuriya 

April 24, 2020

Sectors such as airlines, gambling and tourism industries are in financial crisis and are asking for or have already received government bailouts. One sector that is also in crisis but has not received much support in the UK, the US or Australia is the higher education sector.

One reason for that in Australia is that the regulatory governance of the sector is facing a systemic crisis. The political and economic conditions that sustained the governance of the sector from its reform in the 1980s are challenged by the current impact of the coronavirus pandemic.

Higher education is pivotal for the economy and has been estimated to contribute more than $66 billion to it. Yet, the current crisis has exposed the underlying vulnerabilities of the regulatory governance of the sector.

It is useful to see this governance as an attempt to manage a trilemma of competing objectives: first, the widening of access in the context of strong public funding constraints; second, politically managing private and public support for tuition fees, which, in Australia, was through income-contingent loans; and third, the promotion of research competitiveness.

The heuristic value of the trilemma is that not all these policy objectives are achievable, particularly given the funding constraints and required trade-offs. To see how the governance has failed higher education, we shouldn’t focus on the trade-offs but on understanding the modes of regulatory governance – the economic foundations – through which the policy tensions and crisis were managed.

More specifically, there were three pillars of crisis management that, in turn, were dependent on the system of financialised capitalism.

The first pillar of crisis management was a system of income-contingent loans – the Higher Education Contribution Scheme (HECS) ─ a regulatory arrangement that managed public subsidies and private loans to finance higher education and the increasing privatisation of tuition.

Over time, Australia has shifted the burden to individuals. This was masked by a kind of fiscal illusion where loans were subject to future income streams, thereby making it politically easier to shift the burden of higher education financing to students.

However, the rapidly deteriorating employment situation – particularly in areas where business and law graduates are employed – will make the private burden of HECS politically more difficult to sell. In particular, the deteriorating employment situation for graduates will expose the extent to which HECS served to privatise the cost of education. HECS was a case of debt fare that depended on economic conditions that are no longer sustainable. In the absence of government funding, this will in turn create a severe funding crisis for institutions.

The second pillar of crisis management is the extensive reliance on international student enrolments. As support from public sources declined, a full 25 per cent of university revenue has come from international students – although this does vary from institution to institution. Australia’s sandstone universities – the Group of Eight (Go8) – rely on international students for about a third of their revenue.

While the largest population has been Chinese students, there have been significant increases in Indian student enrolments in Australia in the past few years.

This increased revenue has been a safety valve diffusing and shifting the burden of falling revenue – the trilemma again – to international students. It has allowed significant cross subsidisation of research in Go8 institutions.

However, this mode of crisis management was dependent on ─ among other things ─ continuing economic growth in China and India.

It also depended on the ability of middle- and lower-middle-class parents to access credit to finance the education of their children in Australia. If HECS was a local or nationally based form of debt fare, then international students were in a kind of external debt fare that depended on continued economic growth in emerging market economies that fuelled a system of debt globally.

Additionally in Australia, international students formed a part of the precarious workforce in the service sector during and after their studies through a nexus with the migration system. This is another way that international students were intimately linked to the neoliberal political and economic configuration that emerged in the 1990s.

Even before the Covid-19 crisis, the growth of international students had slowed, and the indications are that they will not come in the same numbers as before. But, more crucially, the political and economic structure that enables these flows is increasingly tenuous. The very substantial debt crisis in the emerging markets will puncture the supply of international systems. The changed conditions will substantially weaken a crucial policy mechanism through which universities navigated the declining amount of government funds over the past half decade.

Finally, the third form of crisis management was the introduction of demand-driven funding. The introduction of demand-driven funding – that is, tying university grants to demand for university places – was a crucial component of the higher education system to expand access to university.

Although this was in the context of declining public support for higher education, the abandonment of this system by the coalition government in late 2017 placed considerable constraints on the sector – particularly in the innovative research universities.

The current economic crisis will bring further pressure on enrolments. One of the key drivers of student enrolment after the enrolment caps were lifted was the ability of students to work and study. As anyone who works in the sector is aware, the nature of a student’s life can change with the availability of part-time work. But as the economy weakens, how much of that employment will be available? Again, this nexus illustrates how the higher education regulatory regime depended on a system of political economy that will – at best – be very difficult to sustain.

Some have suggested that the Covid-19 crisis is a failure of risk management on the part of universities not to prepare for the potential risk of being over-reliant on international student tuition fees. This is a trite point. We need to understand that the politics that drove these policies produced this risk. For example, the growth of international student numbers was a mechanism for crisis management for universities as they attempted to navigate a treacherous policy trilemma where funding was being slashed. What we’re seeing now is a crisis of the higher education regulatory state that has shaped Australian higher education since the landmark reforms of the 1980s.

Kanishka Jayasuriya is a professor of politics and international studies at Murdoch University.

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Reader's comments (2)

And fourth was the shortsighted decision to outsource core functions to the private sector, eg international recruitment to ‘pathways’
This is a vacuous article on the state of play in the education sector in this country. It speaks of govt funding of universities and students and universities as if the taxpayer public has no say in it and only politicians decide at their whims how much and when and to whom to allocate funds with what contingencies if any. The universities have themselves to blame for taking Gordon gekkos “greed is good” to heart and mind and riding the high ego horse gallivanting around the world as they found their place under the sun as the new education empire czars away from that dreary university education realm of the past. These new czars engaged in corporate manoeuvres and watched their stock ticker of student numbers rise and booked fictitious revenue under new accounting rules that only spoke of exports and not the cost incurred in generating those exports if any. In real terms the so called education export was and continues to be in debit balance. Politician had nothing to do with the universities craving for new found riches and status chasing ranking by buying profiled researchers from abroad and paper pushing their research output, none of which translated to any meaningful industry collaboration or a world scale product coming out in the last 10 years. The economic scenario of china and india is irrelevant, it always was; and that’s because students from those countries looked at university as the gateway of getting permanent residence and not real education. So it did not matter what economic straits their countries were in the, student numbers would have as they did accelerated as long as immigration intake remained or was increasing. If immigration were to stop or reduce dramatically as it will by 90 per cent post covid, then university enrolments will reduce by 90 per cent from overseas as well. Most of these international students would not qualify to be admitted in any institute in their own home country even with money but Australian universities outstripped everyone else out with their greed. They sold degrees to the highest bidder and now must do penance; in fact they sold degrees to just about anyone - money or no money, capability or no capability. Australian universities have been selling a dream to international students and the fairy tale continued just like it did with credit default swaps and people with bad creditworthiness being able to afford huge loans or with another of the Boesky era - junk bonds when they turned south. Universities income were super inflated, profits booked when no profits existed, revenues booked when revenue was on thin ice and now they must like in karmic cycle, atone for their sins and restructure and go back to the dreary job of educating people.