Australian university leaders will be reviewing business plans with the aim of reducing expenditure and increasing revenue from existing and new teaching programs. This is in response to the prospect of multi-million dollar losses in overseas student fee income  and possible financial losses for the delivery of science-related, nursing and teaching courses with reduced funding if they retain their current domestic undergraduate profile . Innovative solutions will be required to avoid degrading the quality of teaching programs and to maintain research activities.

A fixed Commonwealth Grants Scheme (CGS) “funding envelope” indexed to CPI until 2023 announced as part of the Job-ready Graduates Higher Education Reform Package, when combined with highly differentiated rates of government CGS funding and student HECS contributions, is a potential game-changer.

It is also a fertile landscape for academic planners. Within a framework in which there remains a maximum price for a CSP place in each study area, universities will have almost total flexibility to determine the number of places offered across sub-bachelors, bachelors and graduate levels.

Universities with a good understanding of the actual cost of course delivery, have flexible workplace relations practices in place, enjoy good brand attraction status within their community and are sufficiently nimble to be able to adjust their discipline mix and subject offerings to optimise enrolment and funding outcomes are likely to benefit greatly. This is likely to come at the cost to universities not enjoying these advantages.

Universities will be increasingly incentivised to modify their CSP load management practices as they struggle to offset significant and enduring declines in international fee revenue.

One perverse outcome of this change may be an overall decline in opportunities for students to enrol in courses the minister has designated as national priorities, particularly STEM courses. At present only 12 of 40 Australian universities have the majority of domestic undergraduate students in science- and health- related disciplines.

The profile adjustment that will yield universities the greatest increase in domestic fee revenue occurs when STEM students are substituted for HASS students. Such a revenue raising strategy is illustrated by the numbers in the following table.

Funding Contributions by Government and Student to Each Commonwealth Supported Place per annum

Field of Education Government CGS Funding Student HECS-HELP





Engineering $16,500 $7,700 $24,200
Humanities $1,100 $14,500 $15,600

From 2021 universities will be permitted to offer places within their CGS funding envelope without seeking prior approval from the minister, provided that the academic suitability of students accepted into courses and the quality of the educational programs delivered are preserved consistent with guidelines to be applied by the recently formed TEQSA integrity unit.

From 2021. the $16,500 CGS funding for one engineering student could be redeployed to enrol 15 academically suitable humanities students ($1,100×15=$16,500). The total funding to the university per annum would then be $234,000 instead of $24,200 for one engineering student.

Through a modest tweak into engineering intakes, a reduction of 10 full-time students (EFTSL) a year for three years with pipeline could realise the necessary CGS funding in arts equivalent to 900 EFTSL over three years (Y1 150, Y2 300, Y3 450 EFTSL)  thereby generating for the university over the triennium an additional $12.6 million (unindexed), (i.e. $14.04m less $1.45m). This is a tempting amount of revenue in constrained times.

While the differentiation between STEM and humanities offers the starkest contrast and greatest rewards, other examples can be cited that would deliver improved revenue outcomes for a university. These include incorporation of humanities components within teaching courses, and transferring places between agriculture, environmental studies and geography.

When combined with the differentiated funding arrangements, the CGS “funding envelope” policy has the potential significantly to disrupt the current domestic student market.

There will be knock-on implications for the student profiles of universities less able to take advantage of the increased levels of funding flexibility. There may well be consequences for the number of universities able to offer programmes such as humanities as a result of finite demand. Legitimate tactical actions by universities will create a tension between the need to increase revenue and the HECS pricing signals the government is seeking to convey to students. The policy is likely to lead to further casualisation of the academic workforce as universities seek the flexibility to adjust course delivery to perceived growth opportunities.

Frank Larkins and Ian Marshman
Honorary Fellows Melbourne Centre for the Study of Higher Education

2 July 2020.


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