Special Report      32 min 25 sec
Reinventing Higher Education in Australia

Professors Glyn Davis and Simon Marginson weigh in on the choices and challenges facing Australia's higher education system in an increasingly competitive global tertiary market. With host Adam Morton.

"Universities are these strange beasts that on the one hand are highly regulated, regulated in a way few other institutions are in our economy, and with no price signals. You can only send out a signal based on perceived prestige and quality." - Professor Glyn Davis




           



Professor Glyn Davis AC
Professor Glyn Davis AC

Professor Glyn Davis has been Vice-Chancellor and Principal of the University of Melbourne since January 2005.  In this Chief Executive Officer role, he oversees the educational and administrative affairs of the University.

Professor Davis previously was Vice-Chancellor of Griffith University in Queensland and has also served as Director General of the Queensland Department of the Premier and Cabinet - the most senior public servant in the State of Queensland.

He holds an Arts degree with first-class honours in political science from the University of New South Wales and a PhD from the Australian National University for a thesis exploring political independence of the ABC.
His academic career as a lecturer, researcher and professor in politics and public policy spans forte than 20 years and includes the award of a prestigious Harkness Fellowship to work at the University of California, Berkeley, the Brookings Institution in Washington, and the John F Kennedy School of Government, Harvard.

Professor Davis has written widely on policy and governance. His most recent publications are a third edition of The Australian Policy Handbook (with Peter Bridgman, 2004), The Future of Australian Governance: Policy Choices (co-edited with Michael Keating, 2000) and Are You Being Served? State, Citizens and Governance (co-edited with Patrick Weller, 2001).
He was Foundation Chair of the Australia and New Zealand School of Government (ANZSOG) which is headquartered at the University of Melbourne.
He is a Fellow of the Academy of Social Sciences in Australia and a Companion in the Order of Australia.

In April 2008, he co-chaired the Australia 2020 Summit which brought together 1000 of Australia’s best and brightest brains to tackle the long-term challenges confronting Australia’s future.

Simon Marginson
Simon Marginson

Simon Marginson is Professor of Higher Education at the Centre for the Study of Higher Education at the University of Melbourne, a post he has held since 2006. He works mostly on higher education policy, universities and globalization, the knowledge economy and creative work, and issues in international education. He has held Australian Research Council project grants continually since 1995 and was designated an ARC Australian Professorial Fellow in 2002. Simon is also a Fellow of the Australian Academy of Social Sciences. He has published numerous papers and six scholarly books, including The Enterprise University (2000, with Mark Considine) and Prospects of Higher Education (2007). He has recently completed three research-based reports for the OECD including a major study of Globalization and Higher Education, and is active in public debate and in providing policy advice to governments here and abroad on higher education matters. 

In November 2008 it was announced that Simon Marginson had been awarded the University of Melbourne’s Woodward  Medal for Research in the Humanities and Social Sciences at the University , for research published in 2003-2007 on higher education and globalization, ‘in recognition of an exceptional contribution to knowledge in the field.’ The Medal is awarded annually for research ‘that is considered to have made the most significant contribution by a member of staff to knowledge in a field of humanities or social sciences’.

Credits

Host: Adam Morton
Producers: Kelvin Param and Eric van Bemmel
Audio Engineer: Craig McArthur
Voiceover: Jacky Angus

Series Creators: Eric van Bemmel and Kelvin Param

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Reinventing Higher Education in Australia

VOICEOVER
The following is an Up Close "special podcast" on the current state of Australian higher education. Our regular programming returns in the next episode of Up Close.

ADAM MORTON
Hello, and welcome to Up Close, coming to you from the University of Melbourne, Australia.  I’m Adam Morton, a journalist with The Age, a major newspaper in Melbourne, and today’s topic is Reinventing Higher Education.  More than ever, higher education is a global market place.  For evidence you need look no further than the recent Times Higher Education Supplement rankings, where the National University of Singapore, based in what is still considered a developing economy, was ranked higher than all but one Australian university.

Students are more prepared to cross borders to study than ever before.  Melbourne alone is home to about 100,000 international students, and Australia as a whole has seen its international student numbers grow exponentially over the past decade.  This has happened as Australia’s higher education system has reached something of a crossroads.

Universities claim they are desperately under-funded.  They say government funding has fallen well below the cost of educating the students, and research funding is also seen as inadequate.

In this climate, the Labor government elected late last year promised an education revolution, and has instigated a review of the higher education sector being carried out by Emeritus Professor Denise Bradley.  To discuss the health of the higher education sector, I am joined by Professor Glyn Davis, Vice Chancellor of the University of Melbourne, and Professor Simon Marginson, a professor of higher education at the University of Melbourne and a respected commentator on the sector.

Glyn, Simon,  welcome to Up Close.

Glyn Davis  
Thanks, Adam

SIMON MARGINSON  
Thanks very much, Adam.

ADAM MORTON  
Glyn, if we can start with a broad question.  What is the role of a publicly funded university in the 21st century, and how is it changing?

GLYN DAVIS
I think there are three key things that a great public spirited university does.  The first is that it researches.  It provides this flow of new ideas, new inventions, new technologies.  The second thing that a great public university does, of course, is teach – teaching and learning.  It’s bringing in new generations of students, taking them through all the acquired knowledge, but also all of the skills necessary for them to be inventive, creative and original.  The third is knowledge transfer, that universities are embedded in communities.  They’re part of a broader conversation.  Information has to flow back and forth.  If they’re simply cut off from the world they’re part of, then they don’t make that broader contribution.  To take that third mission, we have with us Simon Marginson today, one of Australia’s great public intellectuals, and much of his role is about helping a broader public understand why education and higher education might be important, a classic example of knowledge transfer and now at the core of what a university does.

SIMON MARGINSON
I think, Adam, too, the ways in which the university is changing, in particular the research process, is becoming embedded not just in pure and applied research in laboratories and social science rooms and so on.  It’s happening through professional training, and it’s happening through even undergraduate learning.  In fact, you now hear talk about students at primary and secondary schools in Australia picking up research skills as part of the process.  I mean, research as a way of thinking and doing.  This sort of reflexive, critical, can we do it better, how does it work, let’s take it apart and do it again:  that way of approaching all the problems of life is embedded in the university mission, and increasingly becoming embedded in the whole knowledge economy.

The second one is the role of universities and other higher education institutions in educating international students.  Now, Australia is in the forefront of all the countries that export education to other countries by bringing their students into its shores and educating them there, but all countries are opening up their education systems increasingly to foreign students, and in this passage of students between countries and acquiring more than one knowledge and more than one culture, you’re seeing, I think, the formation of a new kind of world in which there will be a lot more mobility and a lot more international understanding.  In some ways this is foreshadowing later changes which we’ll see at the level of world governments.

The third way in which I think universities are changing is in relation to their role in solving global problems.  They’ve always been important players in things like the big epidemic medical problems and so on, but increasingly we’re seeing a conscious effort to mobilise research universities around the world in a co-operative way on issues like global warming, and I think we’ll see that role increasingly at the forefront.

ADAM MORTON  
Glyn, how is Australia performing in the changing global environment?  University ranking is a fraught business, but if the recent Times higher education supplement rankings are taken as a guide, there appears to have been a decline in performance.

GLYN DAVIS  
That’s absolutely right.  In fact, every Australian university except the ANU fell, and the ANU was found to be better than Stanford and Toronto and most of the premier European universities, which is a great tribute to the ANU and/or a spark of concern about the reliability of The Times higher education rankings.  But rankings are now part of the system, and what is fascinating is just how dominant they’ve become in government thinking about what universities should do.  So that you see in a number of countries massive investments in a few universities to try and ensure that that country is well represented in the international rankings, China most conspicuously, but just as much in Germany, Taiwan, Korea, the same pattern emerging.

It’s not clear that rankings are a particularly good guide to how well a university meets its public mission, but it’s a very good guide to the citations and investment in research, particularly in science, because the rankings are heavily distributed towards science.  That’s in the nature of what you can measure and how you would know it made a difference.  Those rankings are narrowing what it means to be a university.  They have a quite poor effect, in my view, on specialisation.  They force universities into choices that are really about how we’ll do in the rankings rather than what do our students and our communities need.

It’s like railing against other things in modern life.  You can rail, or you can do something about it, but you can’t ignore it.

SIMON MARGINSON  
Yes.  I think there are good and bad ranking systems.  The best one we have currently is the Shanghai Jiao Tong University Institute of Higher Education Index, which unfortunately is focussed solely on research performance, and so it doesn’t tell us about comparative quality of teaching or of impact of research in the wider community in the industry, or community service.  In those rankings, the Australian performance is improving, which is interesting, which may indicate that our top universities are concentrating more effectively on scientific research.  I mean, Melbourne moved up from 79 to 73 in the 2008 Jiao Tong, which is a good performance and puts us up with the best European universities, basically, below the major American players.

One of the reasons why we don’t do as well in rankings as some other countries do – and Singapore is a good example to mention – is that the rankings are partly sensitive to the level of expenditure, particularly on staffing, on academic staffing.  Australia’s student/staff ratios are not very good by world standards.  We’ve got a lot of students per staff member;  our staff are stretched thing between research and teaching roles, so we’re hoping the Bradley review will help us, both in terms of the quantity and quality of our staffing, but also in terms of the ranking position.

ADAM MORTON
Well, putting aside rankings for a moment, Simon, how does Australia’s system compare to those in other countries in terms of providing affordable quality opportunities for students?

SIMON MARGINSON
I still think we do pretty well.  If you look at the Australian education system over the last 30 years or so, it’s been measurably ahead of the world on most indicators.  We’ve been a high participation country, on the whole, and we have been an affordable country.  I mean, you can compare us there again with North America.  Australia has managed, I think, reasonably well with the balance between economic efficiency and equity and a modernising system.

Research perhaps not as strong as the other English speaking countries:  Canada, UK, and US.  We’ve got great medical research in pockets.  We’ve got areas of real strength in science.  But we should be doing a little bit better in research, and that’s becoming, I think, more and more important.
Our teaching, I think, has been modern and effective.  We haven’t done a great deal to improve our position in international terms in the last decade or so, and I think the view of most people who are close to educational research and innovation in Australia is that our comparative position is under some threat.  You know, it comes down to the raw level of investment, that is now beginning to lag significantly behind most of the OECD region in the public expenditure areas.

ADAM MORTON
Glyn, in Melbourne University’s submission to the Bradley review, it suggests that the system is terribly flawed, the result of a string of ad hoc changes without an overall vision.  Can you briefly explain the current student funding model and spell out what you see as its shortcomings.

GLYN DAVIS
Adam, essentially the national government decides how many places will be available in every discipline, and it distributes them across the country to universities based on its estimate, presumably or workforce needs, and it then funds each discipline at a different rate.  So there are around 12 funding rates.  So universities are managing this complicated group of individual course funds and student load, and they’re trying to bring that together as a sort of coherent management.
It makes it very difficult for universities, for example, to change distribution of places within the university very quickly, so that if in a particular year, fewer students apply for science but many more for engineering, the universities can’t just shift places to where the demand is, from science to engineering.  They’re not allowed to do that because they’re nationally mandated and they’re provided at a particular funding rate and you can’t shift between rates.

Now, the Commonwealth has learned at the margins how to be more flexible in allowing you to shift load from time to time, particularly in areas of high demand, but nonetheless Australia is going through a – well, until recently it has been going through a huge minerals boom, and yet there hasn’t been the allocation of significant new places into engineering and mining engineering, and we face a national shortage of that and geologists.
So it’s a nationally controlled system, and it’s relatively inflexible.  But it’s only part of the system.  There’s also this other largely unregulated system which is about international students, and until recently domestic fee paying students through we’re no longer allowed to take those at undergraduate level.  Here, universities operate in a market.  They can offer courses.  They can attract students from wherever they can find them, and they bring them in.  So universities are these strange beasts that on the one hand are highly regulated, regulated in a way few other institutions are in our economy, and with no price signals.  You can’t compete on price.  It costs the same to go to Ballarat as it does to Melbourne as it does to anywhere else.  So you can’t send a signal out based on cost.  You can only send out a signal based on perceived prestige and quality.

On the other hand, you’re managing this market-based part of the institution which brings in more money than the Commonwealth funded students.  So the market part really matters, and it’s subject to fluctuations and currency and demand and world financial crises.  Somehow you’ve got to bring those two things together in order to manage an institution, so you get a sense of the sort of structured incoherence that that involves, and the challenge for trying to balance public obligations against the reality that you need those private students in order to fund your public obligations.

So it is a confused system.  It’s a complex system, and it’s one that I think is probably unsustainable in the long run.

ADAM MORTON
I’d like to hear how you propose to fix it, but before we get to that, perhaps can we talk a little bit about the impact the current model has had.  You suggest in your submission that universities are becoming more reluctant to offer new places to Australian students, effectively because they’ll lose money in teaching them

GLYN DAVIS
Adam, that’s exactly right.  You make a loss on every domestic student which you have to make up by taking fee paying students.  Now, clearly a core part of the reason we’re here is to train Australians, and there’s something perverse about all of the incentives being about taking fewer Australians in order to take as many international students as you can.
That said, international students add so much to the experience and the campus and the diversity of student life that nobody would want to shift away from them.  It’s not that international students are a flag of convenience.  They’re actually a really core part of the educational mission of Australian universities.  We have amongst the most international universities in the world, and this is a great thing.  So there’s no plea here to – you know, let’s fund more Australian students so we take less international.  But there is this strange dichotomy that we treat domestic students completely different from the way we treat, regulate and attract international students. It would probably be better if similar logics applied across both.  

SIMON MARGINSON  
One of the consequences of the way we fund our system and their high dependence on international students for core funding of domestic activity is that it attenuates and limits our international mission and our international engagement somewhat.  So while we’ve got terrific numbers, especially from east and south-east Asia and south Asia, we’ve got as many students from China and Hong Kong combined as the whole of the United States higher education system, which is 15 times as large, so we are very internationalised in terms of bodies, if you like, people.

But we’re not doing enough in taking our own domestic students off shore.  We’re not attracting enough high quality PhD students because we don’t have enough scholarship funding to compete with United States and the UK and Canada in that area.  At the moment, we’re using a significant chunk of our international student revenues, which is 15 per cent of our total income, to make up for the fact that we don’t fully fund the cost of domestic students places, and we don’t fully fund research.  We only fund about 70 to 80 per cent of the cost of research.

So we’re using international students to plug the holes in our Australian system, when really we should be using international students just to enrich our Australian system.

ADAM MORTON
You’re listening to Melbourne University Up Close.  I’m Adam Morton, and I’m speaking with Professors Glyn Davis and Simon Marginson about higher education.  So, Glyn, how do we fix the system?  What do you propose?

GLYN DAVIS
There isn’t just one thing you do that makes it better, but essentially you might want to apply the same logic we do for international students to domestic students.  You might want universities to be able to decide how many students they take rather than have government choose for them, so that universities can vary their size and can shift resources across disciplines as demand shifts.
Now, governments will always be concerned about overall costs, so they’ll always cap the total amount of money available to universities, which is fine, and they’ll probably want to cap some very expensive high-end courses, of which medicine is the most famous, but dentistry in fact can cost more, and there are a few others.

The second thing is we’re going to have to face up to the question about what we charge students, and whether the current charging system is sensible.  We currently have a system that’s completely arbitrary.  Some students are paying only a small cost of the overall cost of their education, and others are paying the overwhelming majority.  If you’re a law or a commerce student, you’re paying more than 80 per cent of the cost of your education.  If you’re a science, agricultural science, medicine student, you’re paying a very small minority.

We’ve never really had the debate about whether that’s ethical, reasonable, defensible.  So you might want costs of courses more closely tied to the real cost of presenting the course, and then you might want to deal through scholarships and bursaries with a mechanism to make sure that you don’t then run into equity problems, rather than trying to solve the equity problem up front by just imposing arbitrary costs.

We are very fortunate in Australia.  We have the Higher Education Contribution Scheme, the HECS scheme.  It is a brilliant piece of public policy and it’s the foundation on which we can move to a new scheme.  It allows students to study without being hit for up front costs, and that is hugely important.  The trouble with an expensive system – and ours is now an expensive system for students;  we used to think of America as expensive;  we’re now broadly in the same range – is that you can’t have a system that stops people getting to university because they can’t afford the fees.  A system that says you only have to pay the fees after you graduate and when you earn sufficient money to start paying back is just a superb piece of design, and we need to maintain it.

SIMON MARGINSON  
There’s another element to the cost problem too, and that’s student assistance payments.  Historically we’ve provided good support for student living allowances while they’ve been studying, which is an additional payment to the cost of tuition, and when you go to western Europe and Singapore, in fact, you find excellent support provided for student living costs.

We’re in a situation in Australia now where the level and availability of grants and loans for student living costs is at the lowest ebb it’s been really since the late 60s.  As a result of that, many of our students – in fact, about 70 per cent of full time undergraduate students – are working significant hours during semester.  About a third of the students who work say that it is significantly affecting their study time.  We suspect that it’s true also of a proportion of the others.

So you’re now in a situation where the student living support regime is relatively weak and it’s being to impact the quality of student education, and it may well be that using something like an income contingent post graduation repayment system of the HECS type, which is used for tuition, should also be applied for student living allowances well.

GLYN DAVIS  
Just so.  The truth is we face a simple choice.  We’re either a public system, properly funded as a public system in which market considerations don’t enter, or we’re a system that reflects that there’s a fair bit of private money in this, and private money is HECS.  Private money is the money that people are themselves paying the contribution.

If you accept the second logic, you have to then follow through to get any advantages out of using it.  You’ve got to allow student choice to shape the system.  You’ve got to allow institutions to vary their size.  You’ve got to find a language to discuss education that reflects the reality that people are paying their own money, or they’re pledging their future income, in order to get something they highly value, which is a great education, and there’s nothing corrosive about the concept of education per se that comes from there being private investment in it;  but the language of markets has proved to be a great stumbling block for, I think, this debate, and one we haven’t resolved.  

ADAM MORTON
What are the ramifications of a demand-based model of education?  Would we see less popular and less lucrative disciplines such as languages, history, mathematics, come under threat?

SIMON MARGINSON
The evidence is very interesting on this.  North American experience suggests that where you have broadly market choices, you actually get strong departments of philosophy and classics, and even of languages, because there are people who choose those.  But what it does is it forces universities to be clear about what they do and don’t offer.  We have a system where every university tries to basically offer every course it thinks it can find students in.  So there are classes running in agricultural sciences at most Australian universities.  All of them are sub economic, and there’s no way that you can make a specialty out of agricultural science, because there’s too much competition and none of it gives you an advantage.

Whereas once you have student choice determining it, some universities will get out of fields in which they’re just not going to be competitive, which will strengthen other institutions in that chosen field.  So it tends to produce more specialisation.  It tends to produce student choice.  But it also requires students to make a more informed choice than is currently the case, and we know one of the biggest factors for Australian students in their choice of institution is transport;  how close it is to home, because they’re intending to stay at home, and therefore what’s the most convenient local campus.

Well, once you start to get specialisation in institutions, that choice shifts.  It’s no coincidence that in the US, most students will leave home to go to universities, because they’ll pick the university that matches the profile of what they’re looking for, and it’s unlikely to be in their home town.  Indeed, it’s said that the whole point of going to university in the US is so that you can, the moment you turn 18, leave home, leave your parents a couple of thousand kilometres behind you, and start a rather enjoyable new life.

We don’t have that.  University for us is a relatively seamless passage from school for many students.  They’ll stay at home.  They’ll live in the same social and other patterns.  It isn’t the transforming experience it is elsewhere.  One of the interesting questions for us is if we were more dependent on students having to choose us by our offerings and by the student support we would have to offer to attract students, it might change the balance between universities deciding and students deciding.  

ADAM MORTON
Does this mean the future is the new system that the University of Melbourne moved to this year, of a two-tiered model with broad undergraduate degrees and professional programs at post graduate level?  Will we see major universities offering this model, and just a handful of smaller specialised other universities?  

GLYN DAVIS
Adam, I think the pattern that we’ll see emerge is more diversity.  At this stage in Australia, every university is broadly the same in terms of the way they structure their degrees.  The Melbourne change this year is the first time that pattern has been consciously broken, and some other institutions are clearly going to follow - the University of Western Australia has made that clear – but most won’t.

And they will rely on the fact that for many students a vocational choice is what drives them to university.  They’re not interested necessarily in a general education.  They’re very clear about what it is they want.  There will always be a big market for those students.  There will always be institutions who see those students as their principal audience, and that’s great, because that means if you want a general education before you think about doing law, you’ll go to a university like Melbourne or Western Australia.  But if you decide from 14 that law is the only thing you ever want to study, you’ll choose a university that offers that at undergraduate level.

So we’ll get a much more nuanced and diverse system.  The way Melbourne has gone is broadly consistent with North America and Europe, so it’s very much going to be the dominant world pattern of how education operates, but it’s never going to be the only pattern.  

ADAM MORTON
You’re listening to Melbourne University Up Close.  I’m Adam Morton, and I’m speaking with Professors Glyn Davis and Simon Marginson about higher education.  Can we turn attention to research?  How is it funded in Australia, and how does the funding system compare with other OECD countries?

SIMON MARGINSON
Australia, like most countries, has a mix of public and private funding of research.  Approximately two per cent of our gross domestic product is invested in research each year.  Like a number of OECD countries, we would like to see more private investment in research.  Business investment is an important player because it not only sustains research as an enterprise;  it ensures innovation;  it ensures that research is applied in useful ways, in product development and in marketable exports, and so on.

But a significant component of our core research funding is public.  It occurs in Australia not only through research in universities but also through research in government laboratories.  A big chunk of our research money goes into medical research, and Australia performs reasonably well, I think, across most fields of research, with distinctive strengths in certain areas of medicine and the life sciences.  We’ve got a long term edge in areas of agricultural research and we’re increasingly a player now in ecologically related research:  land reclamation, desalination, that kind of field.  Alternate energy, we hope, will become a flagship of our research effort in years to come.

There are areas in the fundamental research fields where we could probably be stronger, and we’re not yet at the level of the best American players, but increasingly research is a world-wide activity.  A lot of our money now in research is going into collaborative activity involving Australian researchers working with teams in Europe, Asia and North America.  The big infrastructure-based international collaboration is playing an increasing role as they do in fundamental physics, for example, now, in a whole range of areas, but research funding is critically dependent on the willingness of both governments and corporations to look ahead and to take a punt on areas of potential research strength that will produce useful discoveries downstream.

It is an area which requires a long-term view.  It requires an investment horizon much longer than most other fields of investment, and certainly public investment, and it’s an area where increasingly the major Asian governments – I’m thinking of Singapore, Korea, Taiwan, China, and China in particular – are now investing heavily in, and where I think Australia will be working collaboratively in the years to come.

ADAM MORTON
Glyn, as well as the shortfall in student funding, you’ve also spelt out that you believe there’s a shortfall in research funding.  What needs to be done to address this problem?

GLYN DAVIS
In many companies that Simon has just described, research is funded at full cost, that is, you fund both the project – the particular project – and you provide infrastructure funding for the institution so that it can provide the buildings, the laboratories, whatever the infrastructure required to support the research.

The Australian system, however, just funds the project. It assumes the institution already has the infrastructure, or where it does pay some money in for infrastructure, it’s a relatively small amount;  23 cents in the dollar, typically.  That’s not enough to build research infrastructure.  It just funds projects but it doesn’t, over time, add to capacity.  In North America, though the rate varies, you would expect for every research project to bring in another 50 to 55 cents in the dollar to support building capacity in the institution.  So over time, the American system gets a larger, more sophisticated infrastructure and improves, and that’s how you build, in a sense, a world class research structure.

We don’t do that.  We do everything at the margin on the presumption that you don’t need anything new.  So the key way it’s got to change is we’ve got to fund the full cost of research, ideally by expanding the funding overall to the system, but if you couldn’t do that, at least by funding those projects that we do fund at the full cost. While we fail to fund the full cost, we in a sense have to cross-subsidise research through other sources of income, which is what we do in universities.  We actually raid teaching budgets in order to put money into research because it’s the only way we can keep it going.  It would be better for the system – certainly better for institutions – if the real cost was fully met.

SIMON MARGINSON:
It’s really interesting to see the pattern of investment in universities and higher education and research going on around the world.  The Europeans too have made a commitment to increasing their expenditure on research and development to three per cent of GDP across the whole European Union, rich to poor countries.  Clearly China alone is engaged in something like the same movement at scale.

So you’re going to have three major centres of research activity around the world.  The US, joined to Canada;  you’re going to have Europe with UK sitting alongside it, and with UK is a tremendous research university system by world standards;  and China.  Of course, in Asia, you’ve also got Korea which is not a bad middle level player either;  National University of Singapore in Singapore;  you’ve got the Taiwanese universities as well, which are very ambitious, and the government is putting significant money into them.

So you’ve got this knowledge economy emerging on a global scale, interlinked but competing as well as co-operating.  Canada, of the former British Empire countries, is the one which is perhaps best placed.  Australia hasn’t yet begun the process of investing on this scale for the knowledge economy era.  We’re teetering on the brink of a serious commitment to upgrading research in university education in Australia, and we haven’t bitten the bullet yet, and the Bradley review is, I guess, the first opportunity to do that.

Now, in any national university system now, there is a layer of research universities that plays this major global role, and it’s that layer that’s getting special attention around the world.  It’s not the only thing.  I mean, vocational education is also being lifted in many countries as well, and that will happen here, I think, but we haven’t yet come to terms with the fact that some of our universities have got major concentrations of research capacity, and we need to lift them to the next level in global terms, because we haven’t worked through the distributional politics that that involves.

Hopefully, in the end, we’re going to see both a lift in the general quality of the system overall and some strengthening of the research universities within it.

ADAM MORTON
A question for both of you:  what impact will the global financial crisis have on the sector?

GLYN DAVIS
Very hard to predict.  Most people see education as counter-cyclical, so they think if times get bad, more people want to go to university, which is true, but it’s also true they then can’t afford to pay for it.  So they go to choices that are cheap or accessible.  The main risk for Australian universities is two-fold.  The first is that international student numbers fall, that students are not able to afford to come to Australia;  and the second is, at least for universities like Sydney and Melbourne, with relatively large endowments, that our capacity to add value to the institution through money that comes in endowment is all cut by not getting returns.

Those are long-terms investments.  They will come back over time.  Historic experience suggests somewhere between three and five years to recoup the ground that we’ve lost, which is always disappointing but at least you will recoup it.  But if we saw a large fall in the number of international students, that would have profound financial implications for Australian universities.

SIMON MARGINSON  
And my hunch is that we are going to see a wave of government investment responses to what will be a medium term recession, not as severe in Australia as it will be in some other countries;  not as severe as in the United States, because we’ll be partly supported by continuing demand for our exports at a lower price level, because the Chinese economy will be something of a stabiliser internationally in the next five years, and that’s been very important for the Australian economy as well.

Nonetheless, yes, there will be a recession here, and I would expect that government will invest more in education and training as one of the counter cyclical policy measures that it takes.  How that will play out exactly in the university sector is unclear.  I would expect, for example, that the vocational education sector, and particularly shorter courses and retraining, would probably take up some of that policy action, but you would expect some flow on into support for increasing domestic student numbers in higher education as well.

GLYN DAVIS
And we may see students staying on longer.  Those who would have left after graduation as undergraduates might stay on and do a master’s degree.  That’s a possible trend.

SIMON MARGINSON  
That’s right.

ADAM MORTON  
Glyn and Simon, many thanks for joining me today.

GLYN DAVIS  
Thank you, Adam.

SIMON MARGINSON  
Thank you, Adam.

ADAM MORTON  
I’m Adam Morton, and I’ve been speaking with University of Melbourne Vice Chancellor Professor Glyn  Davis, and Higher Education Professor Simon Marginson.

VOICEOVER
This has been an Up Close "special podcast" on the state of Australian higher education. Our regular programming returns in the next episode of Up Close.

Relevant links, a full transcript, and more information on this episode can found on our website, at upclose.unimelb.edu.au.  You may leave a comment on any episode of up close by clicking at the link at the bottom of the page.  Melbourne University Up Close is brought to you by the marketing and communications division, in association with Asia Institute at the university of Melbourne, Australia.  This special episode was produced by Kelvin Param and Eric van Bemmel.  Audio recording by Craig McArthur. Melbourne University Up Close is created by Eric van Bemmel and Kelvin Param. Until next time, thank you for joining us. Good bye.


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