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.

Total offers

Total offers do show signs of caution, with increases in offers running a bit below increases in applications. Without QTAC figures offers are up 1.1 per cent between 2020 and 2021 compared to a 2.3 per cent increase in applications, with QTAC figures offers are up 2.6 per cent compared to a 4.4 per cent increase in applications.

Did funding rates play a role?

As with any hypothesised influence of student contributions on applications, it is hard to see in the aggregate course-level offer numbers any strong pattern of changes to funding levels flowing through to behaviour. Several fields with less favourable total funding rates, and less attractive over-enrolment incentives (due to lower student contributions), shown in red in the chart below, had solid increases in offers. $14,500 student contribution fields are at both ends of the chart, with the biggest increase in offers (society and culture) and the biggest decrease (management and commerce).

Demand driven and demand constrained

Demand driven funding might have ended in 2017, but the chart below shows that the system is still broadly responsive to demand. More applications tend to lead to more offers, fewer applications lead to fewer offers. The system is always demand constrained; this year fewer people wanted to study business or creative arts courses and so offers fell.

Possibly with favourable per student funding universities fully responded to the increase in ‘society and culture’ applications, while nursing and other health courses only partially responded (medical places are hard capped so universities could not increase them). While there are good financial reasons for not expanding nursing at $3,950 per student place (the student contribution), this hypothesis needs further testing, as there are also practical constraints on the rapid expansion of courses with clinical components.

University-level patterns

The same general applications-offers relationship can seen in the university level data. Universities with more applications tended to increase their offers, while universities with fewer applications tended to decrease their offers.

The chart below is hard to read in detail, but Western Sydney has taken its big increase in applications and gone for growth with a large spike in offers. ANU, Sunshine Coast and CQU have also largely matched their increases in demand with significant increases in offers. At the other end of the applications and offers scale, an eclectic mix of universities will have smaller commencing classes in 2021 than 2020.

Some universities are exceptions to the general pattern. ACU, for example, ignored the second-highest increase in applications and cut offers. On a smaller scale, seven other universities spurned increased applications and decreased offers. Perhaps they wanted to bring the overall enrolments back to the level where they had few partially-funded over-enrolled students.

Offer rates

The university offer rate is the proportion of applicants receiving any offer. It was down 1.5 percentage points, the lowest level since before the demand driven system. JRG could be partly responsible for this, by limiting the funding available for commencing students and making over-enrolments in most fields less attractive than before.

The overall trend, however, may be largely driven by a few specific situations rather than JRG having common effects across all universities and disciplines. This would include the universities that did not respond to changes in applications, and issues with the health courses that had a lot more demand than in 2020.

A thorough analysis should look especially at nursing applications. Historically nursing applicants are less likely to preference other courses, and so if not offered the course they want their preference list is exhausted, and they are classed as ‘no offer’.

Acceptance rates

As noted above, universities had to manage a risk that offer acceptances would be higher than usual due to lower deferment rates and fewer people choosing work over study. Deferments were down, from 11.3 per cent in 2020 to 8.4 per cent in 2021. Reported acceptances, however, were up only 1.6 percentage points in 2021 compared to 2020, and still below the levels of the late 2010s. A caveat to this is that not all acceptances are recorded in the data, and this is a particular problem in NSW, which I have excluded from the chart.

My theory of offer non-acceptance, outlined in a Grattan Institute report on dropping out, is that Australia’s cheap and easy system of applying for university encourages speculative, keeping-options-open applications for people who are not strongly committed to university. They will take a more attractive option if it turns up between when they put their application in and when acceptances are due. A better-than-expected labour market may have reduced acceptances.

In 2021, the significant gap between applications and offer trends for the health fields and for some universities may also have contributed to acceptance rates being lower than expected. Applicants are less likely to accept offers for second or lower preference courses.

Conclusion

It’s hard to see how JRG could have had any positive effects on offers other than for the $14,500 courses, which we possibly observe in society and culture. A few universities cut offers despite increased demand, but there could have been non-JRG reasons for this. Low over-enrolment payments in the health fields may have constrained offers, but these did increase and, as noted above, there are practical constraints on quick expansion. But the contraction in total offers that JRG threatened did not happen.