V-cs flinch at funding policy pinch

January 15, 1999

Federal funding of Australian universities in two years will be at its lowest for a decade, forcing institutions to look for private sources of income.

A report on higher education spending for 1999 to 2001 reveals that direct federal government grants to universities will drop below Aus$4 billion (Pounds 1.5 billion) a year for the first time since 1990. Yet universities are expected to lift total revenues to a record Aus$8.6 billion next year through attracting more full-fee Australian and overseas students and marketing their facilities and research.

The report predicts enrolments of domestic full-fee students will rise by 92 per cent or almost 12,000 over the three years to 2001. Similarly, the number of overseas fee-paying students is estimated to jump by 50 per cent to 90,000 in the same time frame.

John Niland, president of the Australian Vice-Chancellors Committee, said the reduction in government funding was a matter of deep concern and had to be reversed. The government was cutting its spending on higher education by more than Aus$1,000 per student, he said.

"The AVCC believes that such a withdrawal is not justifiable in terms of the benefits society as a whole draws from universities. While government has increased the number of subsidised undergraduate places, it has cut the number of postgraduate places by an even greater number," he said.

Universities were managing scarce resources effectively and had dramatically increased revenue from non-government sources. But falling government funding would sorely test the capacity of the system to maintain quality, he said.

The report released by education minister David Kemp underscores the success universities have had in raising income. But it also shows that the shift to private sources has meant their external debt has grown by more than Aus$100 million to almost Aus$280 million in three years.

According to the report, nine universities now have debt levels that are causing concern, even though assets could be liquidated in the short-term to meet repayment obligations. Four of the institutions have debt-to-equity ratios exceeding 10 per cent and these are being monitored by the department of education.

Professor Niland said: "Good management performance should not be used as a justification by the government for continuing the funding squeeze."

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