Australia’s higher education sector has traditionally obtained nearly 60 per cent of its funding from the federal government in the form of grants or loans, however, this is set to change.
Fee deregulation, the uncapping of enrolment numbers and the restructuring of funding models have created an atmosphere of uncertainty for tertiary education institutions. Adding to this, the federal government is seeking $2 billion in savings from the sector, despite abandoning plans for full university fee deregulation in the 2016 federal budget.
With reforms shelved until 2018, Australia’s universities are now relying on one-year funding agreements, which makes it difficult to plan for necessary asset and maintenance expenditures. This is a particularly pertinent issue for universities because a significant portion of funding is project-specific, which limits spending flexibility.
On the positive side, revenue for the higher education sector has been supported by Canberra’s drive to increase the number of 25-34 year olds with a tertiary education to 40 per cent by 2025. This move has seen an 11.2 percentage point increase in the attainment tertiary qualifications for this age bracket between 2001 and 2013. The sector has also benefitted from growth in international students, with education now Australia’s third-largest export, worth $20 billion.
However, as demand surges, the battle for Australian student preferences has also become more competitive. Students are becoming increasingly mobile, and more willing to leave home to study at a university of their choice. Prestigious universities in the United Kingdom and North America are popular and they are decreasing the local advantages some institutions once had. The rise of Massive Online Open Courses (MOOCs) also presents a disruptive threat to the industry, with students able to access free online courses offered by respected institutions overseas.
As competition increases, universities cannot afford to let funding uncertainty prevent necessary investments. With the potential for student fees to increase exponentially in 2018 if fees are deregulated, universities need to create world-class facilities and services to compete.
The labour intensive nature of the industry has made wages the major cost burden for tertiary education institutions. The focus on wages often detracts from other vital investments, such as the maintenance or replacement of specialised equipment, which play a major role in attracting staff and students. This has become particularly burdensome in recent years, with technological advancements rendering equipment obsolete quicker than ever before, and depreciation costs rapidly rising as a share of revenue. This is a pertinent issue for the medical, science, engineering and information technology faculties.
While investment income and philanthropy help to bridge the shortfall, their volatility makes it difficult for universities to rely on them for long-term capex commitments. The consequence is that equipment requirements may not be met or, that marketing budgets are cut – both factors that are used to attract the right talent and students.
The funding future of Australia’s universities is uncertain but funders that are willing to think outside the box can help them to overcome these challenges.
Alleasing works with some of the oldest universities in Australia and New Zealand, as well as younger entities, including Charles Darwin University and the Universities Admissions Centre. Alleasing has enabled these institutions to access the latest technological assets to support staff and students. It has also improved productivity for staff via a system that enables monitoring of assets across numerous campuses.
For more information on leasing, visit ‘Our Solutions’ page.
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