The distinction between university higher education and vocational courses would be abolished under a bold plan for a complete federal takeover of tertiary education – including state-run Tafe colleges – proposed by advisory firm KPMG.

The blueprint, released on Wednesday, proposes spending up to $2.4bn more a year to create a standardised national system of accredited courses and to restore the demand-driven system so that places in all forms tertiary education could be uncapped.

If adopted, the KPMG proposal would effectively reverse recent changes including the Coalition’s two-year freeze on commonwealth grants for university places and restrictions on student loans for vocational education.

The report argues that the distinction between higher education at universities and vocational education and training is “unstable and outmoded”.

Under the revamp, the Australian Qualifications Framework would accredit qualifications of varying skill levels which could attract different levels of funding but would not be classified with the “binary distinction between higher and [vocational education and training]”.

KPMG proposed taking the politics out of the pricing of tertiary education by setting up an independent authority to determine the “appropriate price” for teaching and set the maximum amount of student contributions that can be levied.

The KPMG report said in-principle all domestic Australian students should get income-contingent loans for higher education, with annual and lifetime borrowing limits set according to the expected private benefits of degrees and other qualifications.

While it praised the “brilliant” Hecs-Help student loan scheme it warned that different levels of funding by discipline had left “a generation of university graduates with significant levels of debt not always calibrated to the employment prospects for their field”.

The KPMG report said that a federal takeover of vocational education from the states “may be the hardest to achieve” of its recommendations but is “fundamental” to its plan.



Funding should be allocated separately for teaching and research, which would allow tertiary education institutions to specialise in teaching or research rather than the current model, which encourages all universities to offer a roughly equal mix of both.

The KPMG report recognised Labor’s decision to uncap loans for vocational education and training had led to a “significant drain on public money”, including an estimated $1.2bn in inappropriately issued loans to “unscrupulous providers”.

It said the regulation of the vocational education and training sector “needs to be tightened, so that registered training organisations are all of high quality and committed to the mission of education and training”.

But it said the tertiary education sector “must be supported by public funds” because private markets alone “will fail to deliver the education and training outcomes we seek as a whole”.

The KPMG report estimates that states and territories currently provide $2.9bn to tertiary education, the federal government gives $3.3bn in grants and loans while fees raise a further $1bn. It estimates its reforms would have cost an extra $1bn to $2.4bn in 2016.

The KPMG report builds on a recommendation in the 2008 Bradley review that the federal government take responsibility for creating “a continuum of tertiary skills provision primarily funded by a single level of government and nationally regulated”.

KPMG’s calls to break the binary distinction between forms of tertiary education is similar to the call by the Business Council of Australia chief executive, Jennifer Westacott’s, for the government to grant student loans and funding in a way that does not discriminate between university or vocational education.

Similarly Labor has promised to review tertiary education with the goal of making prospective students to see Tafe and university as “equally attractive study options”.

On Tuesday the assistant minister for vocational education and skills, Karen Andrews, said in a statement that new data showing student numbers are steady at 4.2 million is evidence of the “strength and resilience” of the sector.

Andrews said Turnbull government reforms had “reshaped the system so that quality VET providers now focus on recruiting students who are genuinely interested in gaining real skills for real careers – in seeing their course through to the end”.