Will tertiary fee changes in Australia increase Trans-Tasman study?

Pii-Tuulia Nikula

Tertiary fees in New Zealand versus Australia: Fees Are Important, but not as Important as Financing

In Australia, the Education Minister Dan Tehan has proposed an overhaul of the existing higher education funding system to offer 39,000 additional study places by 2023 and 100,000 by 2030. The proposal has been presented as budget neutral and hence the expansion would be enabled by increased cost-sharing from state to students and institutions. The reform includes an objective to tunnel undergraduate students to what government has coined as ‘job-ready’ fields.

The redistribution of funding means that the annual contributions required from future students in arts and humanities could more than double and be charged at $14500 AUD per year, clearly exceeding student contributions in fields such as medicine, engineering and architecture. At the same time, future students enrolled in fields such as STEM, nursing and English would be paying less. For instance, in mathematics the student contribution maximum is proposed to go down from $9696 AUD to $3700 AUD. At large, the reform will also mean reduced per-student funding to institutions.

This paper is going to address two questions. First, how does this proposal compare to student contributions in New Zealand? Second, are we going to see an increase in the number of students interested in shopping for the most affordable Tran-Tasman options?

It is important to first highlight the shared roots of Australian and New Zealand student funding polices. Australia and New Zealand followed similar paths in the late 1980/early 1990s with significantly increased cost-sharing from the state to students. The initial reforms were driven by severe economic problems and the acknowledgment of the importance of larger skilled workforces vis-a-vis poor higher education participation rates. The decision to fund the expansion by increasing private contributions was partially justified by pragmatic reasons in an era of limited state budgets. However, it is clear that the traction that the neoliberal ideology had gained in both countries played an important role in the user-pay justification and introduction.

The starting point of the current Australian and New Zealand domestic tuition fee paths were relatively low flat fees for all study fields. However, both countries adopted differentiated fees/tiered government contributions in the 1990s, commonly justified by private benefits and differences in delivery costs. Hence, students in study fields such as medicine were required to pay much higher fees than those enrolled in arts. Between the early 1990s and now, both countries have experienced a notable expansion of higher education participation and a significantly increased cost-sharing from the state to students.

A central part of Australian and New Zealand student contribution/domestic fee models has been the income contingent student loan instrument that has helped mitigate market failures by allowing students to defer their private contributions until they have finished their studies. In the current day, these loan schemes differ notably in their treatment of students in specific areas. For instance, compared to Australia, New Zealand students and former students have benefitted from a generous interest free student loan policy since 2006. However, with respect to median incomes in both countries, the Australian system has a higher repayment threshold (currently $46620 AUD), at least somehow reflecting the underlying narrative of private benefits that is often used to justify higher education cost sharing (this being less visible in the Tehan proposal). The same is difficult to argue in the New Zealand case, where student loan debt repayments are required at income thresholds close to annual jobseeker benefit rates and without progressive repayment rate mechanisms.

There have been multiple changes in fees and student financing that have influenced Australian and New Zealand students between the early days and now, but the most radical departure in the Trans-Tasman cost-sharing paths occurred in 2018 when the New Zealand Labour Party led coalition introduced its fees free policy, entitling all school leavers and those new to tertiary level study to one year without fees. The government has hence made additional payments to cover the cost of all fees free enrolments. The fees free plan was initially announced to extend to two years of study in 2021 and three years in 2024, but the future of the scheme is unclear, as no announcement has been yet made. Hitherto, based on the national statistics the success of the scheme – at least in its stated objective to improve participation rates has been very limited.

Some of the benefits of the fees free scheme, such as the evident reduction in student debt and evidence of a small, but still notable proportion of students reporting that the scheme influenced their decision-making, must be hence evaluated in the context of the overall costs and the key objectives of the scheme. Even radical fee changes have been found to have a limited impact on participation when student financing schemes (such as government loans) are available. Government has also more cost-efficient ways to support participation from under-represented groups. Moreover, in the New Zealand policy context, the expansion of the fees free scheme may pose a risk to the open access tradition or to other areas of the student finance portfolio, if future governments are looking to save costs.

Some of the key arguments used in the Tehan proposal last week, such as the ‘job ready graduates’ and emphasis on STEM have also gained traction in New Zealand. For instance, National-led governments increased student achievement component (SAC) funding to STEM fields. In addition, the government announcement in April this year emphasised the need “prepare the system for significant growth in participation in key strategic areas as greater numbers of New Zealanders are expected to look to retrain and some industries need bigger workforces”. To achieve this objective, the government decided to introduce a $1.6 billion NZD Trades and Apprenticeships package, that allows fees free study over the next two years in chosen vocational courses, such as building, construction, agriculture, community health, counselling and care work. This reform is targeted to the vocational rather than the university sector, but the overall approach to funnel students differs considerably from the proposal put forward in Australia.

The 2018 report shows how tertiary students in New Zealand pay around 24 percent of the full costs of their study vis-à-vis the government’s share of 76 percent. When the impact of the interest-free student loan subsidy is considered, the actual share is closer to 14 percent (students) – 86 percent (government). Even if these figures are not directly comparable to the ones reported in Australia students 42 % – government 58 %, the average private contribution as a proportion of the total cost is notably lower in New Zealand. However, due to issues such as cross-country differences in the cost of delivery and varying private contributions, the average proportional contribution does not necessarily reflect the dollar value payable by students.

The actual Trans-Tasman differences in current domestic contributions differ between study areas. In some subjects these are relatively small, but for instance, Australians studying business or law would qualify for significantly lower fees at New Zealand universities ($6500–7000NZD/pa versus the current student contribution maximum of $11355 AUD/pa in Australia, 1 AUD = 1.07 NZD).

Providing the Tehan proposal is adopted, future students interested in arts and social sciences would be looking to do so at a cost of 5700-7200 NZD at New Zealand universities vis-à-vis the $14500 AUD student contribution maximum proposed in Australia. Similarly, New Zealanders enrolled in subjects such as mathematics and education would be paying lower fees in Australia. For a comprehensive evaluation of pros and cons, one would need to consider the time it takes for students to pay back their student loans and how the overall reduction in per-student funding is going to impact on institutional behaviour, teaching quality and support services.

Hitherto, Trans-Tasman enrolments have only been around one percent of all enrolments. So can we expect to see a change in Trans-Tasman full degree student mobility? Will Australian arts and humanities students be incentivised by lower fees across the ditch?

The above assumption would be – at least partially – based on the argument that students solely act in their economic self-interest. The option to study overseas is not attractive or feasible to many prospective students due to several different reasons, including personal preferences, family commitments and information asymmetries. At the same time, even if online delivery was more readily available, domestic fee entitlement is conditional on Australians residing in New Zealand. Clearly, those interested in law, nursing or some of the other professional pathways, would also need to be aware of relevant Trans-Tasman recognition schemes.

The existing evidence shows how at large, participation seems to be insensitive to even radical fee changes when income-contingent student loan schemes are available. Even more importantly, Australians are neither eligible to the fees free scheme nor student loans/allowances unless they have resided three years in New Zealand. Moreover, degree-seeking students cannot use the Australian HESC-HELP loan scheme to cover New Zealand fees. Hence, most Australian students would experience significant up-front financial barriers in New Zealand. The same applies to New Zealand citizens wanting to study in Australia. These up-front costs without available secure financing is a higher barrier compared to the proposed fee changes when an income contingent student loan scheme is in place. In particular, the upfront costs and capital market failure would deter prospective students most sensitive to fee changes, such as students from lower socioeconomic backgrounds. Hence, we are unlikely to see a large increase in the number of students interested in shopping for the most affordable Tran-Tasman options.

The overall comparison demonstrates how the Trans-Tasman differences in private contributions vary depending on the field of study. If the Tehan proposal is accepted, these differences are likely to grow further. However, with the current student financing scheme designs, it is unlikely that we will see a significant increase in Trans-Tasman mobility. It is also clear that Australia and New Zealand have moved apart in their overall treatment of students and higher education cost-sharing arrangements.


Categories: Education
Pii-Tuulia Nikula
About the author

Pii-Tuulia Nikula

Pii-Tuulia Nikula is an education and public policy expert with a special interest in issues related to contemporary education systems and social policy initiatives in New Zealand and Finland. Pii-Tuulia holds a PhD in Politics and International Relations from the University of Auckland. She is currently working as a lecturer at EIT in Napier.