One of the policy decisions in today’s Mid-Year Economic and Fiscal Outlook is to rescind Labor’s cut in the student contribution amounts for science, maths and statistics subjects.
While students starting before 2013 will be grandfathered, those starting in 2013 will according to the government’s estimates pay $3,662 a year more, or about $11,000 over a three year degree.
I opposed the cut to student contributions at the time, among other reasons because I doubted that it would increase demand. The MYEFO repeats this argument, citing the Bradley review of higher education policy.
The Bradley review, however, reported shortly before the cut to student contributions came into effect. The student applications data since suggests that my prediction, along with Bradley’s prediction, was wrong.
In the two years after the cut took place, demand for science courses increased 32% in a market that was up 12% overall. Though the slow-moving DEEWR bureaucracy hasn’t yet published the 2011 applications data, media reports earlier in the year from the tertiary admissions centres suggests that science demand was up again.
Given that science graduates were having above-average difficulty finding work on course completion even before the demand surge converted to more graduates, cooling demand is not a problem if that is what occurs.
Though we can never tell for sure simply based on applications, a drop in demand following a price increase would help increase our confidence that relative prices were a science demand driver.