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Australia’s Universities: Last of the Great Socialist Enterprises?

By Steven Schwartz - posted Tuesday, 15 February 2000

Let me begin by turning to the issue of enrolment. The reason that enrolment is such an ordeal is neither staff stupidity nor indolence. The vast majority of university employees are dedicated professionals who work long hours for below-average salaries. Most love their work and their institutions, and they want to see universities thrive.

The real problem is philosophical and systemic. The people who work in institutions like hotels and private hospitals operate in a competitive, market-driven environment. They know that their livelihood depends on pleasing their guests and patients and keeping them out of the hands of their competitors.

Universities are different. In an era when electricity suppliers, telephone companies, airlines, hospitals, tram companies, and even prisons are required to compete on service standards and price, higher education remains the last of the great socialist enterprises.


Here is how the Australian system works.

A small group of undergraduates, around 10 per cent, pay the full cost of their education. These fee-paying students are mainly international students although a small number are Australian. There are also post-graduate fee-paying students studying in courses such as the MBA. In either case, full-fee paying students do not receive taxpayer support.

The remaining 90 percent of undergraduates have their university education subsidised by the Commonwealth. Universities receive around $10,000 for each of these students. The Commonwealth recoups part of this funding from the students, either as an up-front payment or through a surcharge to their income tax once their income reaches $21,000 per year. In other words, students borrow the money and pay it back through their taxes.

The Commonwealth Government, after consulting universities, determines each university’s share of the subsidised undergraduate places. No matter how good they are or how weak they are, no matter whether they teach obscure courses or popular ones, no matter how well they treat students or how poorly, every university in the country receives an allocation of subsidised places. This number becomes the university’s enrolment target. The government extracts a heavy penalty from universities that fail to reach their targets, so most deliberately overshoot. The extra students are funded by the government at a low marginal rate. At present, there are so many marginally funded students at our universities, they could easily fill a new large-sized university.

Because of their prestige, location, or range of subjects, students clearly prefer some universities to others. However, because a university has only a fixed number of subsidised places, it cannot expand its intake to meet the demand. The result is that students may not be admitted to their preferred institution. Students excluded from their first choice of university, usually on the basis of their secondary school performance, try their second choice, or third choice, or even fourth choice.

In other words, by giving each institution an enrolment limit, the government protects the less popular universities and the less popular courses. Students excluded from their preferred university wind up at a less preferred one. Because they too must meet their targets or risk penalties, the unpopular universities cannot reduce their intake in response to low demand. The result is that they may be forced to admit students who have little chance of completing their courses successfully.


Because every university has a monopoly on its share of government-funded places and because the Commonwealth decides how much students should pay (and how much of their fee should be given to universities), it is difficult for universities to think of students as customers. They are a necessary part of the higher education system, universities would be quiet without them, but they are hardly a controlling force.

So, the real reason that it takes a whole day to enrol is because students are simply bit players in a system controlled by the Commonwealth and the providers. Remember when Telecom took weeks to install a phone? Remember when bank tellers would go to lunch leaving a queue of people standing at the desk? This is how government monopolies behave. To many outsiders, and to many insiders, universities remain large public works projects with guaranteed lifetime employment.

Thus far, all attempts to change the current system by giving funding directly to students have been resisted by a coalition of academic and student unions in collaboration with an odd mixture of Labor and National politicians. But, the pressure is inexorable, and change is inevitable.

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This is an edited extract from the Bert Kelly lecture which he delivered on 10th February, 2000. The Bert Kelly lectures are organised by The Centre for Independent Studies. A full copy of the lecture can be obtained from their website.

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About the Author

Emeritus Professor Steven Schwartz AM is the former vice-chancellor of Macquarie University (Sydney), Murdoch University (Perth), and Brunel University (London).

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