Australian unis are too important to be left to bleed

12 May 2021

Vice-Chancellor Professor Brian Schmidt on why the budget is bad news for universities and bad news for all Australians.

The 2021 federal budget just handed down is one of the biggest spending budgets in Australia's history, as it should be. The global pandemic economic shock is not yet over, and spending on infrastructure, vocational education, child and aged care, and mental health will help much of Australia get back on its feet.

But while the university sector is grateful for the funding we have, approximately $10bn for higher education over 2021-22, this is not new money and there's been no increase to research block grants. There is nothing of note for our universities, except for $1.1m to support industry PhDs and additional flexibility for student visa holders when it comes to working hours. This is not only a real shame but a missed opportunity; universities are vital to our future prosperity.

Australia's incurred debt, while large, is much smaller than we faced after the second world war, and our country was able to grow from that position into the era of prosperity we have all grown accustomed to over the past several decades.

Growth and prosperity came from productivity-enhancing investments overseen by the department of postwar reconstruction, led by HC "Nugget" Coombs, as well as the "populate or perish" immigration program. Major initiatives included the establishment of the "full-employment policy" as well as the creation of the Australian National University.

While the full-employment policy seems to be making a deja vu-invoking return to the 2021 budget, immigration understandably doesn't feature due to border closures. Harder to understand is why the university sector has been left to bleed, given what most might expect to be its pivotal role in the future growth of the Australian economy.

In 2018 ANU made the decision to cap our total student numbers. We sacrificed the revenue growth that would have come through increasing them. In retrospect, this was very unfortunate timing. While we had one of the sector's healthiest balance sheets in 2019, missing a year's growth of student revenue meant the pandemic has hit us harder than anyone in the sector - we have racked up a deficit of nearly 15% of our budget in 2020. Sadly, one in 10 of our staff have now departed.

With Australia's borders closed for the foreseeable future, ANU is the canary in the coalmine. The cumulative effect of border closures on international student numbers will lead to other universities catching up with my university's budget woes this year, and worse in the years beyond. This will have a crippling effect on Australia's post-pandemic recovery. Gone will be a large fraction of the nearly $40bn of export income - the majority of which is not spent in universities, but in the broader Australian economy. Gone will be the large supply of skilled but relatively inexpensive labour. And gone will be the leading-edge research capacity our country needs to prosper post-pandemic, a significant fraction of which is supported by international student fee revenue.

It's absolutely imperative we open our national border and return our international students as soon as we safely can. Universities have plans in place to do this safely and are ready to act. We just need commitment from government to act on them.

It is easy to forget the importance of the research role of our universities, but Coombs' postwar reconstruction featured research universities for good reason. Research universities provide the underpinning knowledge to adapt to a rapidly changing world, whether it be a pandemic or climate change. Decades of university research have been vital to the success of the Covid response so far; retaining and building this capacity will help us survive the next pandemic.

There is no shortcut to expertise. We have to constantly grow and nurture it in our universities. New industries and ideas emerge from our campuses and graduates, and the economic spill-overs are large and important.

Of the highly developed nations of the world, Australia is unique in the required level of cross-subsidisation of university research by student fees because the true cost of research is far from covered by the direct funding from research grants. For example, for every dollar of government research grant money a university takes on, it must raise approximately 60 to 70 cents from its students to undertake the research. With the job-ready graduate program pairing domestic student fees to the average cost of delivery, and the collapse of overseas student income, something has got to give; that will be both the quality and quantity of research, and additional squeezing of what Australian students can expect to get out of their degrees.

This is not a recipe to increase our nation's productivity, nor is it going to allow us to grow Australia in the future through smart immigration. It is the antithesis of Coombs' genius that has served Australia so well since the 1940s.

We must ensure we have a university system designed for our nation's future, and not just rely on whatever emerges in the chaos from the pandemic-driven shock to our business model. Universities want to serve the nation through our education and research, but to do so we are going to need a helping hand to get to the other side of the pandemic. And when we get there, we are going to need a fit-for-purpose system that incentivises and supports the development of what Australia needs to shape our future.

This article was originally published in The Guardian.