Inflation and student places under Job-ready Graduates

Earlier this week I made my first submission to the Universities Accord review. One issue the submission covers is whether Job-ready Graduates policies can meet demand from the so-called Costello baby boom birth cohort. This post looks at how large variations in Commonwealth contribution rates and misaligned systems of indexation could affect overall growth in student places. A subsequent post looks at the geographic distribution of places.

The relative value of Commonwealth contributions

Job-ready Graduates combines a fixed maximum basic grant amount (MBGA) for higher education courses (all CSP coursework except medical places and places for regional Indigenous bachelor degree students) with Commonwealth contributions that vary between disciplines. The maximum funding a university can receive for higher education courses is the lesser of their full-time equivalent places delivered multiplied by the relevant Commonwealth contributions or the MBGA amount in its funding agreement.

This system creates trade-offs between opportunities for students, which are maximised by focusing on the courses with the lowest Commonwealth contributions, and meeting skills needs, with skills shortage occupations typically requiring graduates from courses with higher Commonwealth contributions.

Trade-offs were already a feature of the pre-JRG funding system, but JRG exacerbated them as the chart below shows. One new place in a funding cluster 4 course (medicine, dentistry, agriculture) costs 24.6 places in funding cluster 1 course (business, law, most humanities and social sciences). Under the pre-JRG system the highest funding cluster was 10.9 times the lowest funding cluster; still high, but a less extreme trade-off than under JRG.

We don’t yet have 2021 enrolment data to see where enrolments are moving by discipline. A move towards the higher Commonwealth contribution fields will consume more of the available funding, leaving less money to finance additional student places.

I don’t believe this is an immediate major issue. System capacity may be down on 2020 JRG projections but so is domestic demand, due to a strong labour market and flat or falling numbers of school leavers with an ATAR in the big states. But increased school leaver numbers due to a larger birth cohort will push demand up again in the mid-2020s.

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