Are we headed for a big jump in uni unmet demand?

On Monday, the AFR reported that several state university admissions centres were reporting big increases in applications for next year: 12% up in WA, 11% up in Queensland, 7% in Tasmania. There were smaller increases of 2% in NSW/ACT and 4% in SA. Victoria is yet to report numbers. Possibly a weak labour market for young adults is making education more attractive.

Due to new rules for Youth Allowance eligibility from next January, more people offered a university place are likely to seek university admission in 2010 rather than defer. More students will be able to get YA via the parental income test and not need to take a gap year to get ‘independence’ from their parents, and it will be harder (though not impossible) for students from upper-income families to take an ‘independence’ gap year and then go on welfare.

So demand for places in 2010 is, on the evidence of the early applications data, and on the theory of lower deferments, likely to be well up on 2009.

Will there be places for these additional university hopefuls, or will many of them end up in the ‘unmet demand’ statistics?

For 2010 and 2011, a modified version of the old ‘socialist central plan’ model of higher education will operate. The number of financed places per university will still be largely determined in Canberra. However, the government will pay up to 10% more than the ‘basic’ level of per student federal grants (currently 5%). This allows universities to enrol students above their quota.

That basic quota will be slightly higher next year. Including some new places announced yesterday, there will be about 5,700 or 1.4% more undergraduate places in university funding agreements in 2010 compared to 2009.

What we don’t know is what scope universities have within their funding arrangements to offer additional first-year places. Because the total number of Commonwealth-funded places is fixed within a range, first-year places are a balancing item which can be adjusted upwards or downwards to meet overall enrolment targets.

So how many places could be made available for first-year students depends on how many students universities already have, taking into account estimated attrition among those existing students. At the end of 2008, universities were on average close to their government-set targets.

But it is possible that an unusually large number of undergraduates commenced in 2009. The offer acceptances data for 2009 shows an increase of 24%18% on 2008. However this over-states enrolment growth, because it includes deferments. For some states, last year’s acceptances figures don’t include students who deferred and so the actual increase in acceptances cannot be calculated. Actual enrolment figures are not available.*

However, even if we assume that enrolments are up only 10% in reality, there will be a ‘bulge’ in the system – the second year group of 2010 and third-year group of 2011 will be bigger than otherwise forecast as the 2009 commencers work through their degrees. We should probably also assume that fewer students than in recent years will drop out before completion, and more will do an honours year while they wait for the graduate labour market to improve, taking a place that could have gone to a first-year student.

If this scenario is right, some universities may aim for fewer domestic commencing places in 2010 than they did in 2009, to keep their student ‘load’ within the levels at which they will be fully funded in 2011.

Government funding issues aside, many universities may not want to grow significantly even if they were funded for the additional places, or not be able to do so quickly. Especially if the 2010 demand levels are more due to cyclical and one-off than long-term factors, it would not be prudent to invest in new infrastructure and staff.

One thing may save the 2010 university hopefuls. If the international student market does decline as many predict, there will be capacity intended for them, though they are concentrated in a limited range of disciplines. Domestic students are not as financially attractive as internationals – by 2010 their funding rate will have been cut in real terms for three consecutive years by our ‘education revolution’ government – but they could generate some necessary cash flow until the international market picks up.

* It’s possible that universities ‘bungled’ their enrolment process due to GFC uncertainties. Roughly speaking, they start with their target enrolment number and then make offers based on estimates of acceptances. So say they wanted 70 students and estimated acceptances at 70% they would offer 100 applicants. But if acceptances ended up being 90%, they would have 20 more students than planned. The weakening teenage labour market put a question mark over past acceptance rates as a guide to the future.