Funding for the vocational education (VET) system has fallen to its lowest level in a decade amid a “piecemeal” and “ad hoc” approach to education spending, a new report has found.

The latest education expenditure report from Victoria University’s Mitchell Institute has criticised state and federal governments for setting the country up for an “uncertain future”.

The report, published on Wednesday, accuses policymakers of “refusing to look at education as a cohesive, integrated system”, and for allowing VET funding in particular to fall dramatically.

It warns the VET system has become a poorer cousin to the university system, with government expenditure for 2015-16 in the sector 4.7% below what it was a decade ago.

​In November the National Centre for Vocational Education Research released a report ​ showing ​VET funding from the states and territories had fallen dramatically in the past four years.



​Some of that shortfall has been offset by the introduction of an income-contingent commonwealth loan system to the sector, but changes to that program, introduced ​following widespread misuse, have blunted its use.

The introduction of the system, equivalent to the Fee-Help loans to university students, ​led to widespread rorting and cost blowouts; from $325m in 2012, to $1.8bn in 2014 and $2.9bn in 2015.

At the end of last year the education minister, Simon Birmingham, introduced changes to address the problem, including the introduction of tougher barriers to entry on private training colleges, loan caps, more stringent course eligibility criteria and ​mandatory student engagement measures.

But the Mitchell Institute report found ​ earlier changes which limited the scheme to higher level VET courses had almost halved costs from $2.9bn in 2015 to $1.4bn in 2016.

​The director of the Mitchell Institute, Megan O’Connell, said a combination of reputation damage and the lack of a “cohesive funding framework” for the VET system meant it was being made less attractive to prospective students.

“If you are undertaking a certificate 3, for example, you’re paying a lot more up front than you would for a bachelor degree, so those different fees structures between the VET system and university fees might be persuading students to choose a bachelor degree, when that isn’t necessarily what they need or want to be doing,” she said.

“What we’d like to see in the tertiary education space is governments considering what we want for young people in a consistent manner; the funding regimes are quite different for Tafe and other VET providers, so that does influence where students undertake courses.”

According to the report, university funding grew by more than 50% in the same period that VET funding contracted. O’Connell said there was a “growing disparity between universities and vocational education and training”.

“Last year we reported that VET expenditure had plummeted to its lowest point in 10 years – well this year it has dropped even further,” she said. “We could be setting up a very uncertain future for Australia, since many predicted growth areas for jobs require vocational qualifications.”

But the report found that after rapid growth since the introduction of demand-driven education funding, university spending had begun to flatline, growing only 1% between 2014-15 and 2015-16.



One of the report’s authors, Kate Torii, said that could be down to the “tapering off” of demand after the growth years following the introduction of demand-driven funding.