Student income support in decline, says Intergenerational Report

Australia will spend less of its wealth supporting disadvantaged tertiary students in 40 years’ time, despite a policy push to diversify university enrolments, a landmark government report says.

And the proportion of Australian workers with degrees will remain in the minority, despite an Australian Universities Accord recommendation to aspire for a majority by 2050.

Treasury figures show that over half a century, spending on Youth Allowance and Austudy – the main income support schemes for tertiary students – will decline by about two-thirds as a proportion of gross domestic product (GDP).

The figures are outlined in the latest Intergenerational Report (IGR), released by federal treasurer Jim Chalmers. It charts the future of a nation with an ageing population, as fertility rates fall and life expectancy rises.

The report says spending on income support schemes for younger Australians – including parenting payments, childcare subsidies and family tax benefit, as well as Youth Allowance – will decline as a share of GDP.

The Australian Council of Social Service said this was mainly because of the way some schemes were indexed, rather than the ageing demographic. Charmaine Crowe, the council’s programme director for social security, said the schemes were pegged to the consumer price index, the primary measure of inflation.

“Governments always assume that wages will outstrip inflation, and indeed…that has typically happened in the past,” she said. “As long as payments are not linked to wages, it will typically see those payments fall behind [compared to] other incomes.”

The allowance is already “grossly insufficient” to cover people’s costs, forcing them to go without food, medication and transport, Crowe said. The number of recipients has also been in decline for roughly two decades.

She said the gulf between Youth Allowance and students’ perceived needs would increase over time, if it continued to be indexed to inflation rather than wages. “Living standards change,” she explained. For example, mobile phones – rare 30 years ago but essential items today – had not been factored into the “basket of goods” that determined Youth Allowance rates when the scheme originated in the 1990s.

The report also says the degree-qualified proportion of Australian workers will rise from about 40 per cent now to 47 per cent in 2065-66.

The Universities Accord recommended that Australia should aspire towards 55 per cent of young adults earning bachelor’s qualifications by 2050, up from about 45 per cent now. The government has never accepted that recommendation, instead embracing a goal of 80 per cent of working Australians holding tertiary qualifications by 2050 – a target on track to be slightly exceeded, according to the Intergenerational Report.

Universities Australia wants the government to adopt the 55 per cent target. “The jobs outlook shows the bulk of future growth will be in roles requiring university qualifications,” said chief executive Luke Sheehy.

“The IGR shows just how big that job is. We need more Australians getting in, staying in and graduating – especially people who have traditionally missed out.”

The report says education spending will decline from about 1.7 per cent of GDP now to 1.1 per cent by 2065-66, even though education spending per head of population will rise from about A$1,767 (£941) to A$1,879 over that period.

About 14 per cent of new student debt is not expected to be repaid, up from about 12 per cent when the last IGR was published in 2023, reflecting an increase on the repayment threshold last year.

john.ross@timeshighereducation.com