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University subsidies unjustified, says think tank

The private payback of a university degree outweighs the public benefits, so continued government subsidies are not justifiable, according to a report from the Grattan Institute, a public policy think tank.

The report, ‘Graduate Winners: Assessing the public and private benefits of higher education’, published on 5 August, suggests that higher fees would not deter students from seeking university education. But it would save taxpayers’ money.

“This year the Australian public will spend AU$6 billion on higher education tuition subsidies. As student numbers grow, expenditure will soon reach AU$7 billion,” the report says.

The Grattan Institute suggests a new “systematic framework for setting tuition subsidies” that would see $3bn [in 2016-17] being transferred from government to families and students.

The most important step in this framework is to ask “whether there are significant public benefits from the course. This could be in additional tax revenues, the supply of skills needed in Australian society, or more general attributes of graduates,” the report says.

Since most graduates do well out of higher education, such as securing good jobs and high social status, most subsidies are for courses that students would take even if they were not subsidised by the government, it says. Tuition subsidies therefore merely redistribute income to students and graduates, at the expense of the general public–particularly those who do not go to university.

Students would still choose to go to university, even with the higher fees, precisely because of the private benefits, the report argues.

The proposal to cut subsidies has been branded unfair by representatives of the tertiary sector.

“While there is logic in attempting to identify the respective public/private benefit, the fundamental flaw in the proposal is the application of a very narrow and theoretical definition of public benefit,” said Belinda Robinson, chief executive of Universities Australia, the umbrella group of university vice-chancellors.

“If the public benefits were as limited as the report suggests, governments in China, India, Malaysia, Korea, Singapore and elsewhere would not be accelerating massive investments in their higher education systems as drivers of economic growth,” she said.