Australia’s prestigious Group of Eight (Go8) universities are likely to reduce the number of people they enrol while increasing fees for each student after deregulation, a key backer of the reforms has predicted.



Ian Young, vice chancellor of the Australian National University (ANU) and chairman of the Go8, argued this downsizing would be good news for the non-Go8 universities as it would “free up” more capable students to attend other institutions – “a trickle-down or a flow-across effect”.

In an address to the National Press Club in Canberra on Wednesday, Young argued the case for removing tuition fee caps for domestic undergraduate students.

He conceded the Abbott government’s higher education package – including fee deregulation, a reduction in the average commonwealth contribution to course costs, and higher interest rates on student debt from 2016 – was unlikely to pass the Senate in its current form.

But he described deregulation as the “holy grail”, saying it was a “game changer” that would allow universities to identify their strengths and pursue excellence, and urged senators to accept compromises that may include changes to the debt and commonwealth subsidy proposals.

Young’s speech was aimed at bolstering public support for deregulation, a proposal backed by just 17% of people in an Essential poll taken just after the budget in May (compared with opposition of 58%). Labor, the Greens and the Palmer United Party – which have the numbers to combine in the Senate to block legislation – have raised serious concerns about fees rising to unacceptably high levels and deterring disadvantaged students from pursuing university courses.

Young pitched deregulation as an opportunity to allow universities to differentiate and “play to their strengths”. The system must change because per-student government funding had decreased by 14% in real terms since 1996, he argued.

“We have created a perverse incentive that rewards universities for enrolling as many students as possible and teaching them as cheaply as possible – that’s what our current system does,” Young said.

“The nature of our university system forces us to be average. We have very few terrible universities, but we have no truly outstanding universities.”

Lobbying for the deregulation of fees has been spearheaded by the Go8, which includes the ANU, Monash and the universities of Melbourne, Sydney, New South Wales, Queensland, Adelaide and Western Australia.

Education experts have predicted that the Go8 universities will be able to increase their fees the most as a result of their prestige, and regional and smaller universities will have access to comparatively less funding. The sector is divided on the higher education reforms and many vice chancellors have raised concerns.

During the question-and-answer session, Young confirmed that Go8 universities were likely to downsize over time, although ANU was the smallest in the group and was not looking to cut its enrolments.

“It’s not surprising that when I look around the Australian sector, if I look at University of Queensland, NSW, Sydney, Melbourne and Monash are all up at 40,000 [students] and above and this is huge by world standards,” he said.

“I can’t speak for all of my Group of Eight colleagues, but certainly [of] those I’ve spoken to, none of them see that as a desirable outcome, and so I suspect what you would see, at least a couple of them have told me this, that their desire would be in a deregulated market to be able to increase the dollars per student, but to start to decrease the size of their institutions.

“In a sense, if you’re not a Group of Eight university that should be good news, because what it means is it’s going to free up in the future more capable students for other institutions. I think there will be a trickle-down or a flow-across effect as a result of that and I think that will be good for the quality of education we provide and indeed for the quality of research we provide.”

Downsizing was “never easy”, he said, but would not happen overnight. He played down the potential for workforce industrial problems, saying the big Go8 universities were likely to pursue the strategy by natural attrition.

Young said non-Go8 universities were “often much more nimble” and were likely to pursue innovative approaches, including strengthening online education. Some universities would decide it was not viable or sensible “to try and pretend to be a comprehensive research university”.

Young called on senators to “give universities the freedom to be brilliant” but said they should “find some sensible compromises” on other elements of the package expected to be presented to parliament in the spring sittings.

He urged the government to “reconsider the impact of charging a real rate of interest” on debts under the system commonly known as the Higher Education Contribution Scheme (Hecs).

The government plans to stop indexing the loans in line with inflation and instead switch to interest at the 10-year bond rate, up to a cap of 6%. The budget decision has fuelled concerns that compounding interest would drive up total repayments over a graduate’s lifetime, with lower-income earners and parents who take time out of the workforce likely to be particularly affected.

The architect of Hecs, Bruce Chapman, has proposed an alternative whereby the higher interest rate applied only when graduates were earning above the threshold for repayments. Another option proposed by Chapman was to apply a one-off 25% surcharge on each graduate’s loan and then continue the existing system of indexation by the consumer price index.

Young also called on the Coalition to reconsider its plan to cut by 20% the average government contribution to tuition costs under the commonwealth grants scheme, but did not nominate an alternative figure.

He said the government’s package included two “very socially progressive elements” that had received less attention, including the requirement for universities to put aside 20% of any extra fee revenue for scholarships for disadvantaged students. Young said the extension of government funding to “pathway programs” such as sub-bachelor degrees would help prepare graduates from poorer high schools so they could achieve their “true potential” in further study.