Future ready?Positioning for growth in a

changing economic and policy

environment

Lachlan Smirl

Deloitte Access Economics

A 40 year revolution??

Source: Higher Education Statistics and UCube, Department of Industry

Note: There is a break in the data series between 2000 and 2001

0.0M

0.5M

1.0M

1.5M

2.0M

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

Number of

enrolments

Abolition of student fees

Dawkins reforms: HECS &

institutional changes

Bradley Review & Base

Funding Review

An uncertain

future?

Kemp-Norton review & HE Reform Bill

Number of

accredited

universities15 4129

A trebling in the rate of participation

19701990

2014

A 40 year revolution??

> The number of people from low SES backgrounds studying for a degree has increased from only a few thousand

in 1970 to almost 140,000 today

> However, as a proportion of the total student population, participation is below parity and not significantly

improving

> In recent years, the rate of participation by indigenous students has grown. However these students are still

underrepresented when compared to the population as a whole.

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

Stu

de

nts

en

roll

ed

Low SES domestic students in higher educationIndigenous students in higher education

1.0%

1.1%

1.2%

1.3%

1.4%

1.5%

2000 2002 2004 2006 2008 2010 2012 2014

Pro

po

rtio

n o

f al

l en

rolm

ents

More disadvantaged students are participating, but they are still underrepresented

Source: Universities Australia, 2013

A 40 year revolution??

> Real spending on

tuition subsidies has

grown by 64% over

the past 25 years,

with an 85%

increase in

supported places

over that time

Enrolment growth has fuelled growth in public expenditure

A 40 year revolution??

> The share of the workforce with a higher

education qualification has risen from around

20% in year 2000 to almost 30% in 2012.

> COAG target to halve the proportion of

persons aged 20 to 64 who do not hold a

post-school qualification at Certificate III level

or above by 2020.

Source: ABS cat No. 6227.0, 2012

0%

10%

20%

30%

40%

50%

60%

70%

1997 2000 2003 2006 2009 2012

Share of workforce with Certificate I qualification or more.

Share of workforce with Higher Education qualification.

> Structural change taking place in the

economy means that employment in

Australia has been increasingly shifting

toward faster-growth knowledge

industries.

> This means that individuals with university

qualifications have been in strong

demand.

Source: ABS Cat No. 5204

Responding to – and driving – a changing Australian economy

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1960 1970 1980 1990 2000 2010

Shar

e o

f to

tal e

mp

loym

ne

t

Services

Construction

Manufacturing

Mining

Agriculture

+10 PP

0

10

20

30

40

50

60

Ch

ina

Ind

on

esia

Ital

y

Au

stri

a

Gre

ece

Ger

man

y

Fran

ce

Spai

n

OEC

D a

vera

ge

Net

her

lan

ds

Den

mar

k

Swit

zerl

and

Fin

lan

d

Irel

and

New

Ze

alan

d

Un

ited

Kin

gdo

m

Au

stra

lia

Ko

rea

Un

ited

Sta

tes

Isra

el

Jap

an

Can

ada

Russian…

Port

ion

of

adu

lts

wh

o h

ave

atta

ined

a t

erti

ary

leve

l ed

uca

tio

n

OECD Nation

2000 2012

A 40 year revolution??

Source: OECD, Education at a glance, 2014

Australia has 8 Universities

ranked in the top 200 in the

world, across all three major

international rankings.

Australia has the 7th highest level of tertiary educational attainment in the OECD

Profound forces of change

Digital disruption

The rise of Asia’s middle class

Intergenerational challenges

Drivers of the next phase of the University revolution

Digital Disruption

Long fuse, big bang?

Long fuse big bang?

> Implications for access, recruitment and delivery

o New consumers and/or existing consumers

> Implications for costs and competition.

> Internationalisation of universities to realise areas of further growth

1. University of Phoenix 11. University of Mumbai

2. Massachusetts Institute of Technology 12. University College London

3. Open University 13. University of Oxford

4. University of Calicut 14. Florida State University

5. University of California, Los Angeles

6. Anna University 16. University of Cambridge

17. Liberty University

8. London School of Economics 18. University of Rajasthan

19. University of Michigan

10. New York University 20. Annamalai University

Source: Google education industry analysis, 2014

> The most Googled European

university in the world in

2014 was the Open University

> 5 of the top 20 Googled

universities in the world were

located in India.

> In 2013, searches for online

universities overtook

traditional universities.

15. Harvard University

7. Stanford University

9. Columbia University

Top 20 most searched universities by Google users worldwide, 2014

Digital disruption may be yet to truly explode

The rise of Asia’s middle class

10

> A key force on the

disciplines that

universities teach

and research in the

future will be where

the next waves of

economic growth

are being

generated.

> Part of this will be

driven by student

demand for courses

where there are

strong employment

outcomes.

> A further part will

be driven by

industry and the

government to

meet the skills,

research and

innovation needs of

an economy in

transition.

Meeting the skills needs of the future

0

5

10

15

20

25

30

500

1500

2500

3500

4500

5500

1998 2000 2002 2004 2006 2008 2010 2012

GDP per capita, current $US(LHS)

Outbound Students (annualflow, '0,000s) (RHS)

Local enrolment, tertiary(millions) (RHS)

The rise of Asia’s middle class

> China’s GDP per capita more than quadrupled over the

decade to 2010

> The number of Chinese undertaking tertiary education grew

similarly – by around 400% - while the rate of domestic

participation in tertiary education grew three fold.

> Outbound mobility ratio 1.7 but growing – huge upside

potential

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Ch

ina

Ind

ia

Vie

tnam

Bra

zil

Thai

lan

d

USA

Nep

al

Mal

aysi

a

Ind

on

esi

a

South…

Ph

ilip

pin

es

Pak

ista

n

Saudi…

Co

lom

bia

Jap

an

Nu

mb

er

of

stu

de

nt

app

lican

ts

Country of citizenship

2012-13

2013-14

The last year has seen

strong growth from

markets like India,

Brazil, Thailand and

Nepal

> And growth will not only come from China.

> Australian universities are well-placed to capture increased

student demand from a number of important countries in our

region, including India, Indonesia, Vietnam and Malaysia.

> While demand for Australian University degrees from Asia is

strong and growing, ensuring that Australian universities

continue to rank highly in terms of teaching and research will

be key to the long-term sustainability of the industry.

Number of student visa applications granted to

offshore applicants by country of citizenship

Higher Education enrolments,

population and growth trends in China

Source: UNESCO, 2012

Source: DIBP, 2014

International student exports

Intergenerational challenges

12

Projections of Australian government education spending

> Higher education a modest contributor

> Projections policy-dependent

Projections of the ‘fiscal gap’

Source: Inter-generational report, 2010

Forces driving greater efficiency and sustainability

> From 2018-19 onwards, when revenue exceeds

spending by around 1.6 per cent of GDP, ageing and

health pressures are projected to lead to a gradual

deterioration in government finances

The policy imperative

13

• Nevertheless, looming fiscal challenges will place increasing levels of pressure on

government expenditures

o Competition for public funds will increase

• But the policy imperative is broader than merely a fiscal one

The world is changing irrespective of policy

It is an imperative to support the evolution of a policy environment conducive

to Australian tertiary education providers embracing the changes confronting

us, and seizing the opportunities that accompany them, in a manner that

maximises the sector’s socio-economic contribution

It’s an imperative of future readiness …

14

1. Maximisation of the value-addMeeting skills needs and delivering valuable qualifications

3. Efficient resource deploymentGetting more out of less

2. Access and inclusionSupporting equity of access and opportunity

4. Fiscal sustainabilityEnsuring public investment matches the relative social return

Features of a future-ready HE sector

Maximising the value add

The opportunity

• It is essential that universities are ready to meet the skills needs of the future.

• Our economy continues to undergo profound structural change as demands from

Asia continue to grow and evolve.

Meeting skills needs and delivering valuable qualifications

The imperative

• Reflecting on presentations on the conference, universities can:

• play a role in understanding the changing skills needs of society

• gain better connection with industry to understand the role that higher education plays

in providing skilled graduates

• enhance the student experience and provide greater transparency around quality of

teaching and learning to students

Access and inclusion

The opportunity

• Both the sector and society stands to benefit from continuing to foster access to

tertiary education for disadvantaged Australians.

• Students from disadvantaged background remain a source of potential

participation growth

Supporting equity of access and opportunity

The imperative

• Experience from the last two decades suggests that HECS alone is not sufficient

• Alternative delivery and funding models are required (e.g. digital, loadings,

pathways)

• Universities need to play an active and creative role in redressing barriers to

participation – irrespective of policy change

Efficient resource deployment

Getting more out of less

The opportunity

• Playing to strengths

• Identifying and leveraging comparative advantage

• Increased pursuit of cost-side efficiencies

• Delivery models, including workforce deployment and digital delivery

The imperative

• High performing global higher education institutions operate at the nexus of

effective educational practices and good management

• Universities need to be prepared to deploy existing resources in increasing

targeted ways to ensure maximum efficiency

• The corollary of this is increased diversification at the sector level

• Responding nimbly to digital disruption and global – and local (?) – competition

Fiscal sustainability

19

Ensuring public investment matches the relative social return

The opportunity

• Fiscal pressure will increase competition for public funds

• Public investment in higher education will increasingly focus on where the socio-

economic return is greatest

• Pressure for greater levels of private contribution likely to continue irrespective of

where the current Legislation lands

The imperative

• Continued revenue diversification

• Realisation of the international education opportunity

• And … , potentially … , fee setting and contestability

The next 40 year revolution??

A new frontier for growth – new markets; different preferences

Distinct and diverse offerings – comparative advantage fuelling

diversification

Stronger industry links; greater vocational focus

More commercial incentives for research

Digital delivery and recruitment – new markets; new methods

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