Covid-19 has revealed a crisis in Australian HE governance

Sectors such as airlines, gambling and tourism industries are in financial crisis and are asking for or have already received government bailouts. One sector that is also in crisis but has not received much support in the UK, the US or Australia is the higher education sector.

One reason for that in Australia is that the regulatory governance of the sector is facing a systemic crisis. The political and economic conditions that sustained the governance of the sector from its reform in the 1980s are challenged by the current impact of the coronavirus pandemic.

Higher education is pivotal for the economy and has been estimated to contribute more than $66 billion to it. Yet, the current crisis has exposed the underlying vulnerabilities of the regulatory governance of the sector.

It is useful to see this governance as an attempt to manage a trilemma of competing objectives: first, the widening of access in the context of strong public funding constraints; second, politically managing private and public support for tuition fees, which, in Australia, was through income-contingent loans; and third, the promotion of research competitiveness.

The heuristic value of the trilemma is that not all these policy objectives are achievable, particularly given the funding constraints and required trade-offs. To see how the governance has failed higher education, we shouldn’t focus on the trade-offs but on understanding the modes of regulatory governance – the economic foundations – through which the policy tensions and crisis were managed.

More specifically, there were three pillars of crisis management that, in turn, were dependent on the system of financialised capitalism.

The first pillar of crisis management was a system of income-contingent loans – the Higher Education Contribution Scheme (HECS) ─ a regulatory arrangement that managed public subsidies and private loans to finance higher education and the increasing privatisation of tuition.

Over time, Australia has shifted the burden to individuals. This was masked by a kind of fiscal illusion where loans were subject to future income streams, thereby making it politically easier to shift the burden of higher education financing to students.

However, the rapidly deteriorating employment situation – particularly in areas where business and law graduates are employed – will make the private burden of HECS politically more difficult to sell. In particular, the deteriorating employment situation for graduates will expose the extent to which HECS served to privatise the cost of education. HECS was a case of debt fare that depended on economic conditions that are no longer sustainable. In the absence of government funding, this will in turn create a severe funding crisis for institutions.

The second pillar of crisis management is the extensive reliance on international student enrolments. As support from public sources declined, a full 25 per cent of university revenue has come from international students – although this does vary from institution to institution. Australia’s sandstone universities – the Group of Eight (Go8) – rely on international students for about a third of their revenue.

While the largest population has been Chinese students, there have been significant increases in Indian student enrolments in Australia in the past few years.

This increased revenue has been a safety valve diffusing and shifting the burden of falling revenue – the trilemma again – to international students. It has allowed significant cross subsidisation of research in Go8 institutions.

However, this mode of crisis management was dependent on ─ among other things ─ continuing economic growth in China and India.

It also depended on the ability of middle- and lower-middle-class parents to access credit to finance the education of their children in Australia. If HECS was a local or nationally based form of debt fare, then international students were in a kind of external debt fare that depended on continued economic growth in emerging market economies that fuelled a system of debt globally.

Additionally in Australia, international students formed a part of the precarious workforce in the service sector during and after their studies through a nexus with the migration system. This is another way that international students were intimately linked to the neoliberal political and economic configuration that emerged in the 1990s.

Even before the Covid-19 crisis, the growth of international students had slowed, and the indications are that they will not come in the same numbers as before. But, more crucially, the political and economic structure that enables these flows is increasingly tenuous. The very substantial debt crisis in the emerging markets will puncture the supply of international systems. The changed conditions will substantially weaken a crucial policy mechanism through which universities navigated the declining amount of government funds over the past half decade.

Finally, the third form of crisis management was the introduction of demand-driven funding. The introduction of demand-driven funding – that is, tying university grants to demand for university places – was a crucial component of the higher education system to expand access to university.

Although this was in the context of declining public support for higher education, the abandonment of this system by the coalition government in late 2017 placed considerable constraints on the sector – particularly in the innovative research universities.

The current economic crisis will bring further pressure on enrolments. One of the key drivers of student enrolment after the enrolment caps were lifted was the ability of students to work and study. As anyone who works in the sector is aware, the nature of a student’s life can change with the availability of part-time work. But as the economy weakens, how much of that employment will be available? Again, this nexus illustrates how the higher education regulatory regime depended on a system of political economy that will – at best – be very difficult to sustain.

Some have suggested that the Covid-19 crisis is a failure of risk management on the part of universities not to prepare for the potential risk of being over-reliant on international student tuition fees. This is a trite point. We need to understand that the politics that drove these policies produced this risk. For example, the growth of international student numbers was a mechanism for crisis management for universities as they attempted to navigate a treacherous policy trilemma where funding was being slashed. What we’re seeing now is a crisis of the higher education regulatory state that has shaped Australian higher education since the landmark reforms of the 1980s.

Kanishka Jayasuriya is a professor of politics and international studies at Murdoch University.