The fifth Intergenerational Report, released on June 28, highlights an outlook for Australia over the next 40 years that is not pretty, illustrating significant challenges ahead.

The implication for universities is that there are likely to be fewer domestic students on campus, fewer academics and professional support staff, and the on-going competition for resources is likely to be fiercer than ever.

The purpose of the Intergenerational Report is to examine “the long-term sustainability of current policies and how demographic, technological and other structural trends may affect the economy and the budget over the next 40 years”.

The Intergenerational Report reminds us that the Australian economy is shaped by three key drivers: the number of people in the working-age population, the proportion of those who work and their working hours and the amount of output produced per hour worked.

The projections in the report are based on current policy settings. It also considers the global economic shock associated with the pandemic and ongoing effects.

Growth continues but at a slower rate

Real gross domestic product (GDP) in Australia is projected to grow at an average annual rate of 2.6 per cent per year to 2060, compared to the average annual rate of growth seen in the past forty years (3.0 per cent).

Over the past forty years, Australia’s population has grown at an annual average rate of 1.4 per cent. As a result of the pandemic, we have experienced the slowest growth in population in over a century (0.1 per cent in 2020-21). Population growth is projected to recover to 1.3 per cent per year by 2023-24 but will then fall to 0.8 per cent by 2060.

This means that Australian population is projected to reach 38.8 million by 2060. This figure is lower than previous projections, which in part reflect the combined effect of the pandemic on every facet of economic and social activity.

The other sobering news is that the fertility rate is projected to remain well below replacement rate of 2.1 babies per woman. It is projected to fall from 1.65 babies per woman in 2019-20 to 1.58 babies per woman in 2021-22. The fertility rate is projected to stand at 1.62 babies per woman by 2030-31 and assumed to remain at that rate until 2060-61. Over the long term it means fewer children at school.

Participation in the labour force has increased over the past forty years and reached its highest level in March 2021, at 66.3 per cent, driven by women aged 24 to 54 and older Australians. It is projected that participation rate will decline to 63.6 per cent by 2060. The report notes this is due to the “negative effect of ageing on the participation rate being only partially offset by higher participation for younger, and future, generations”.

Government spending on education

It is estimated that Australian Government spending on education is around 1.9 per cent of GDP or about $40 billion in 2021-22. This is projected to decrease to 1.2 per cent by 2060. This has already been foreshadowed in previous intergenerational reports.

Government spending is composed of three parts. Half goes to school education, a quarter goes to higher education, and the rest is for vocational education and training. Spending on schools is expected to remain constant over the next 40 years, while higher education’s share of funding is projected to increase slightly.

The report notes that real spending (including lending) on tertiary education per person in the tertiary education population is expected to increase (in 2020-21 dollars) from $1 600 in 2021-22 to $1 840 in 2060-61. Over the next forty years, the projected growth in spending in tertiary education is about half of the projected growth in population.

This spending is significantly influenced by population growth but also the proportion of the population participating in education. In terms of the latter, the proportion of the population in the principal age group for education (5 to 24 years old) has decreased from 27.5 per cent in 2001-02 to an estimated 24.6 per cent in 2021-22. It is expected that the proportion of the population in this age group will fall to 22.1 per cent by 2060-61.

What this means for universities

The first thing is that the “boom” years for enrolments in Australian universities are over. This has been widely debated over the past two years. From 1989 to 2018 annual domestic student enrolment growth was 3.4 per cent.

Prior to the pandemic, there were estimates that the projected growth in domestic enrolments to 2030 would be 1.2 per cent per year, that is less than half than the annual average growth observed over the past three decades. However, the estimated annual growth is likely to be slightly less now.

The domestic school leaver population represents the main student cohorts for universities, but it is worth pointing out that Year 12 enrolments have been projected to remain flat for some years.

The implications of this reduced population growth (and therefore revenue) for universities are vastly significant. We also need to consider that there has been a gradual shift to on-line and multi-modal forms of education. The pandemic has forced everyone to adopt new ways of working and doing things, and hybrid ways are the new norm. These are likely to impact on the ability of universities to deliver education and training, undertake research, engage with industry and communities, and fulfill government policy objectives.

The number of academic and professional staff working in universities is unlikely to return to pre-pandemic levels. Student to academic staff ratios are likely to continue to worsen over the next few years. In turn this may mean that the levels of student engagement and satisfaction with the quality of education is likely to suffer.

Educational inequality

One of Australia’s big successes is the high level of educational attainment in the workforce. Over the period from 2004 to 2020 there was a strong increase in the proportion of persons holding a bachelor’s degree or higher qualification, from 21.1 per cent to 34.6 per cent. (ABS data is here.)

But there is a disparity in the level of educational attainment. Australian Capital Territory (47.7 per cent), Victoria (39.1 per cent), and New South Wales (36.5 per cent) are by far the best performers compared to the weakest performers, Tasmania (26.3 per cent) and South Australia (26.7 per cent).

The figures for people living in remote and very remote (17.2 per cent) and outer regional (18.6 per cent) areas are less than half for bachelor or higher qualifications of those living in major cities (39.3 per cent).

There is also a disparity in educational attainment between male and female students. In 2004, 19.8 per cent of the male population held a qualification, which increased steadily to 30.7 per cent in 2020. In turn females showed a stronger increase rising from 22.4 per cent in 2004 to 38.5 per cent in 2020. Overall, a larger percentage of females hold a qualification compared to males, and females also showed stronger growth in the period 2004-2020.

The message that comes out of the Intergenerational report is that such educational inequalities are here to stay.

In an article published here (202) and a paper here (2019), I noted that as a matter of public policy, both commonwealth and state and territory governments need to mitigate the increased inequalities which result from uneven indices of educational attainment. One way to do so is by providing financial and other forms of incentives to those most disadvantaged to not only enrol at university, but also to complete a degree. In doing so, it may boost domestic demand for higher education.

The bottom line is that making adjustments to policy settings may not be enough to counter the projected weaker economic growth which lies ahead. We all play a part in forging a way forward. The future of higher education depends on the competing demands from the state, civil society, and market forces.

Angel Calderon is principal advisor, planning and research at RMIT


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