In an earlier post I looked at how university applicants responded to COVID-19 and the new Job-ready Graduates student contributions. In this post I look at how universities responded, based on the offers statistics released yesterday. All the numbers are for domestic undergraduate applicants only.

The incentives faced by universities

In the lead up to 2021 university offers university leaders made various statements about trying to meet expected extra domestic demand, as COVID cut job and travel alternatives to study. But universities also faced, and face, a difficult finanacial situation. They are simultaneously being hit by the Job-ready Graduates policy, which reduces their per student funding in many fields, and by the loss of international student revenue, with the borders now closed to new international students since March 2020. These events compromise university capacity to fund domestic undergraduate student places that do not cover their own costs

Capacity aside, Job-ready Graduates creates complex incentives. By funding at average teaching costs it creates an economies of scale model. That’s one reason why we see the closure of low enrolment subjects and courses. If there is no longer any profit on some courses that may also disincline universities from expanding. On the other hand, if universities want to maintain a course then driving up enrolments may the key to it, by spreading fixed or semi-fixed costs over larger numbers of students. And in the $14,500 student contribution fields – arts (with a few exceptions), business and law – there may be a de facto demand driven system.

Universities also need to consider a complex short-to-medium term negative effect caused by JRG only partially grandfathering pre-2021 students. The link has explanatory detail, but the practical consequence is that more of a university’s total Commonwealth teaching grant has to be spent on continuing students, leaving less money for new students.

Yet another complexity for universities is that COVID-19 made estimating student numbers more difficult. For admissions, the key risk was that offer acceptance rates would be higher than usual, and the university would end up with loss making ‘over-enrolments’ (enrolments that earn a student but not a Commonwealth contribution). This created an incentive to be cautious about offer levels.

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