Since it came to office, Labor has deferred dealing with Job-ready Graduates student contributions. First it added student contributions to the Universities Accord list of issues. In February 2024 the Accord Final Report suggested basing student contributions on lifetime earnings. Subsequently the minister said the new Australian Tertiary Education Commission would provide advice. Now we have ATEC’s legislation, but how student contributions will be handled is less clear than I expected.
All legislative references, unless otherwise specified, are to the Universities Accord (Australian Tertiary Education Commission) Bill 2025.
The ATEC bill and per student funding
The ATEC bill does not mention student contributions at all. One of ATEC’s functions, however, will be to advise the minister on:
“The efficient cost of higher education across disciplines and student cohorts and in relation to the Commonwealth contribution amounts for places in funding clusters.”: section 11(d)(ii), section labelled “Functions of the ATEC”.
In different words, in a later section on “Advice and recommendations”, a topic of advice is:
“The costs of teaching and learning in higher education and overall higher education funding amounts, including on a per student basis.”: section 41(1)(b).
While well-intentioned, this policy is unlikely to make any significant difference to Indigenous medical student numbers and could accidentally reduce the number of non-Indigenous medical students.
Is there a problem that demand driven funding can solve?
In his second reading speech, the minister noted the current low number of Indigenous doctors and the benefits for Indigenous patients of Indigenous health care workers.
The main obstacle to further enrolment increases is unlikely to be funding rather than the difficulties in finding potential students who meet the entry requirements and are not being set up to fail.
As announced last year, the government plans to crack down on so-called ‘over-enrolments’ – enrolling additional students on a student-contribution only basis once all a university’s Commonwealth Grant Scheme allocation has been used.
When a proposed new funding system is in place, from 2027, student contribution-only places will only be possible in a buffer zone above a university’s Australian Tertiary Education Commission allocation. 2% and 5% buffers have both been suggested. Currently over-enrolled universities will receive some additional funding to bring over-enrolments within their official allocation of places. However, this will not in all cases reduce over-enrolments to the permitted range. Significantly over-enrolled universities need to moderate student intakes in 2026 to bring their medium-term enrolments down.
Not many current Department of Education staff were there the last time a minister thought reducing over-enrolments might be a good idea. The story is worth telling.
Brendan Nelson and over-enrolment
From November 2001 to January 2006 the education minister was Brendan Nelson, a Liberal. Nelson was worried about the quality implications of significant over-enrolments. The first reference I can find to Nelson’s concern is in a media release from December 2001, a month into his term.
Recently the Department of Education published 2021-2022 data on payments under the Higher Education Continuity Guarantee, a 2021-23 Coalition program to compensate universities for under-enrolments. It has previously released data on a predecessor program, the 2020 Higher Education Relief Program.
It shows that over the 2020 to 2022 period under-enrolments cost the Commonwealth nearly $550 million. On my estimates the sector under-enrolled by approximately 47,000 places. Eight universities were under-enrolled in each of 2020, 2021 and 2022. Only four universities received nothing under the HECG or HERP, showing that enrolment shortfalls were widespread across the sector.
What is under-enrolment?
Under the Higher Education Support Act 2003 universities get paid their maximum basic grant amount (MBGA) – see my funding agreement posts for more detail on this – or the value of their Commonwealth supported places delivered (on a relevant Commonwealth contribution * EFTSL basis), whichever is lower.
During the COVID period the Coalition decided that it would let universities keep their MBGA even if they had not enrolled enough students to justify it. This was called the Higher Education Relief Program in 2020 and the Higher Education Continuity Guarantee 2021-2023. The purpose was to provide stability for universities during COVID and post-COVID enrolment turbulence.
There is a 2024-2025 program called the HECG, but it is a redirect of money to equity programs and has nothing to do with the original purpose of the HECG.
With universities back job shedding, academics and their unions are looking for someone to blame. University leaders and consultants are being attacked for poor decisions. The government also gets criticised. UTS history professor Anna Clark says that over the last twenty years ‘we have seen gradual, steady decline in government investment across the sector’. In his recent lament Broken Universities, Graeme Turner says that there has been a ‘steady decline in the levels of funding per student’.
Five years ago, early in the COVID crisis, I wrote a post about government ‘cuts’. This post is an update.
Funding for Commonwealth supported students
As my earlier post noted, time series data is not straightforward. The chart below focuses on the major student funding programs, in today’s terms the Commonwealth Grant Scheme (CGS), HECS-HELP, and upfront student contributions. These funding sources have always had a link to the number of full-time equivalent Commonwealth supported students, although historically the money they delivered supported research as well as teaching expenditure.
Around these core funding sources other schemes serve the same purpose (e.g. transition funding) or similar purposes (e.g. NPILF). The chart below includes the Job-ready Graduates (JRG) transition funding and but excludes NPILF. It includes money paid from the Higher Education Continuity Guarantee, a COVID measure still in place for universities that ‘under-enrol’ that would normally face a CGS penalty. From 2021-2024 the time series excludes the enabling course loading that was previously in the CGS but moved to IRLSAF. But this funding is back in the CGS in 2025 due to the FEE-FREE Uni Ready places. The regional loading remains out from 2021 as it is still in IRLSAF and will join needs-based funding next year.
Overall my time series goes for simplicity over a full count of expenditure on student-related programs. In the time series, one big structural change should be noted, which is research student funding moving to a separate program from 2001, which caused a significant but artificial year-on-year decline.
Trends in total funding
Focusing on recent times, in nominal dollar terms total CGS funding dipped between 2021 and 2022, which was mostly short-term COVID places coming out of the system. HECS-HELP lending fell between 2020 and 2021, driven by the strange decision to pass on reduced JRG student contribution rates to all current students but to grandfather increased student contribution rates, so that only 2021 and later commencing students pay them. HECS-HELP lending fell again in 2022, with lower student numbers also affecting revenue from a university perspective.
In February I reported on preliminary university-level 2025 allocations under the Commonwealth Grant Scheme and estimates of student contributions.* These have since been updated to add money for FEE-FREE Uni Ready places and regional university study hubs. The revised funding summary is here.
This post looks at the underlying funding agreements for more detail on the ‘higher education courses’ part of CGS funding. As usual in funding agreements since 2021, the detail reveals a range of legal and policy problems.
A spreadsheet summary of higher education courses funding for 2025 is here.
The role of higher education courses funding
Higher education courses funding is intended, by the Higher Education Support Act 2003, to be a flexible block grant. Within their total funding envelope, expressed as the ‘maximum basic grant amount’ (MBGA), universities can move resources across coursework AQF levels and between fields of education, other than medicine.
Although higher education courses funding is supposed to be flexible, both Coalition and Labor governments have used ad hoc funding agreement conditions to restrict use of higher education courses money to purposes chosen by the government.
This has in turn led to the unlegislated concepts of ‘base MBGA’ and ‘total MBGA’. Total MBGA is actual MBGA under HESA 2003. Base MBGA excludes most ad hoc programs. Its purpose is to reduce expenditure on the higher education continuity guarantee and the current equity plan funding. If universities don’t meet the ad hoc criteria they get $0 for those non-delivered places.
Overall trend in higher education courses funding
To the surprise of universities the first-term Albanese government often treated them harshly. But Labor kept the former government’s promise to index higher education courses funding to CPI. That was 4.1% for 2025. They also kept the Coalition’s region-based funding increases. While there are complex financial flows in and out of higher education courses funding – discussed further in this post – it is up 6.1% between 2024 and 2025 to a total of $7,687,211,975.
I won’t have the capacity to produce another edition of my Mapping Australian higher education report in the foreseeable future, but I am extending the life of the October 2023 edition by updating the data behind the charts.
Mapping‘s chart data is the only publicly-available source of long-term time series data on many higher education topics, especially on financial matters.
I had been waiting on the 2023 university finances report before releasing another chart data update. That finally happened yesterday. Despite a record 27 universities reporting deficits, in the aggregate there was a small surplus, after a loss overall in 2022.
2023 had some weak numbers for the two main Commonwealth student programs, the Commonwealth Grant Scheme and HELP. Several factors were behind this: temporary COVID places coming out of the system, Job-ready Graduates reductions in total funding rates for some courses, and weak domestic demand. These programs trended up in 2024 and 2025, as seen in the chart below, although high CPI-driven indexation was a significant factor.
Due to the Department of Education’s under-reporting of higher education funding, last year I consolidated institution-level information into a spreadsheet. There were about 250 downloads each for the original and a subsequent updated spreadsheet, so I decided it was worth doing again this year. The data sources are the funding determinations for the various funding categories.
I emphasised ‘preliminary’ in the post title because the FEE-FREE Uni Ready funding is not yet included. While this is a little frustrating, the upside is that when it is added the amounts involved will be more transparent than might otherwise have been the case. [Update 28/2/25: In Senate estimates yesterday the Department said that FEE-FREE Uni Ready funding equivalent to historical enabling places as of 2022 were included in the funding agreements. Funding for new FEE-FREE Uni Ready places is yet to be released.]
The headline figures to date are Commonwealth Grant Scheme (CGS) – $8.2 billion, estimated HECS-HELP lending of $5.9 billion, and estimated upfront student contributions of $700 million. Overall, about $14.8 billion, with 95% coming from the Commonwealth in cash flow terms. That percentage will go up when we get the FEE-FREE Uni Ready information.
With a break between jobs and other things going on I did not comment in December on the Accord-related MYEFO student funding announcements. Compared to last year’s consultation papers, the announcements included a policy change on over-enrolments, more detail on how under-enrolments will be handled, and funding amounts.
Over-enrolments
One of the worst ideas in the June 2024 managed growth consultation paper was a hard cap on Commonwealth supported places. Currently the main CSP category has a soft cap – once a university enrols CSPs valued at its maximum basic grant amount it gets only the student contribution for additional students. These student contribution-only places are known as ‘over-enrolments’. Under a hard capped system over-enrolments would receive zero funding. I explained why hard caps are a bad idea in this post.
In its MYEFO summary the government backed off a little from the hard cap idea. Now universities ‘will continue to receive student contribution amounts for a small proportion of additional students’. The reason given was the practical difficulty of hitting a precise enrolment target. [Update: At a Senate estimates hearing on 27/2/25 the Department said that ‘the overenrolment buffer will be between two per cent and five per cent’.]
An earlier post looked at Robert Menzies and higher education, first as Opposition leader and then as Prime Minister, from 1945 to 1956. Despite important structural changes in the early 1950s, with the Commonwealth commencing grants to universities via the states and directly financing Commonwealth scholarships, the university sector remained small and financially weak.
In March 1956, Menzies agreed to a university policy review, what became the Murray report. This post draws on my chapter on the Murray report in The Menzies Ascendancy: Fortune, Stability, Progress 1954–1961, edited by Zachary Gorman and published last month.
The appointment of Keith Murray to review universities
By the time Menzies agreed to the review he had already decided that major changes to university policy were needed.
In his book The Measure of the Years, Menzies says that prior to his trip to England in 1956, where he first met Keith Murray in person, he told Treasurer Artie Fadden that he was initiating an enterprise that could not fail to be ‘vastly expensive’.
In December 1956 Murray was appointed as chairman. The four other members included CSIRO Chairman Ian Clunies-Ross, believed to be the subsequent report’s main author.
Andrew Norton 