Archive for the 'Business & profit' Category

Why do public universities use feeder colleges?

Many public universities have close relationships with feeder colleges – more politely known as providing ‘pathways’ to university. Some universities have set up their own, such as Monash College or UTS’s INSEARCH. But others collaborate with private providers such as Navitas. For example, Deakin has an arrangement with the Navitas subsidary the Melbourne Institute of Business and Technology, and Macquarie with the Sydney Institute of Business and Technology.

So why don’t public universities directly offer courses to these students? There would seem to be several reasons:

1) If they took the students directly, they would have to report that they sometimes take school leavers with weak Year 12 results. Whether or not the students improve a lot in their year at the feeder college, the back door entry method allows the course to have higher apparent admission standards.

2) They aren’t equipped to do remedial work – better to clearly identify the problematic students, and have another organisation teach them in different ways.

3) They are equipped to do remedial work, but can’t do it on Commonwealth-supported rates – hence putting them in the full-fee sector. Read the rest of this entry »

Is not-for-profit higher education more profitable than for-profit higher education?

Lawrence Cram argues that Australian universities use large surpluses from undergraduate teaching to support research. A similar argument was made in the US last week, in a Cato paper by Vance Fried (really). Fried thinks that the real costs per American undergraduate are between $5,000 and $9,000 a year, quite similar to Cram’s estimate for Australia. He thinks that not-for-profit unis in the US are more profitable than the for-profits, presumably as the former can use their brands to charge higher fees.

Australia’s largest for-profit higher education provider, the Navitas group, is a listed company so their annual report provides some insight into their operations. Indeed, it provides more interesting material than university annual reports. About 30% of Navitas’s revenue from its university programs divisions is earnings before interest, tax, depreciation and amortisation (EBIDTA). For a commerce course in 2010 they charged international students about $18,000 a year, and local students $15,400. Presuming similar margins this implies per student underlying costs of between $10,800 and $12,600 per student.

However, they are also paying hefty royalties to universities – typically, Navitas feeder colleges are located on university campuses, and teach the same subjects as the first-year courses at that university, though with smaller classes. The annual report says they paid $131 million to university and consortia partners in 2010, 23% of their total revenues. I’m not sure how much this represents genuine costs for the university (does Navitas pay for the buildings?) and how much of it is essentially a rent they can extract by offering articulation for Navitas graduates. Read the rest of this entry »

The renewable energy industry as another popular burden on taxpayers

Australian public opinion has long been protectionist, with majorities agreeing with statements such as ‘Australia should continue to use tariffs to protect its industry’. But some Essential Research polling published today partially qualifies this finding.


Q. Thinking about Australian industries and the ways in which the Government can give them assistance and support – which forms of assistance and support do you think the Government should give to the following industries? (multi-response) Read the rest of this entry »

Do unis contribute to business innovation?

While in Sydney for the Mont Pelerin Society meeting last week, I was the commenter on a Shaken and Stirred dinner talk by Terence Kealey, VC of the University of Buckingham, the UK’s only private university. He’s profiled in today’s Higher Education Supplement.

Kealey is unlike most VCs. The first thing that strikes you is his personality – an extrovert among introverts. The second thing that strikes you are his political views – a university leader who spurns government funding in an industry convinced that it should receive large handouts in the ‘public interest’.

I think Kealey is right that the obsession with linking university research to industry and ‘innovation’ is largely misguided. We’ve had at least 20 years of this as a policy priority. In my comments I argued that the results here are as disappointing as Kealey argues they have been elsewhere. Read the rest of this entry »

Will the David Jones harassment case be bad for business?

Many people, on this blog and elsewhere, think that the David Jones sexual harassment case is commercially dangerous for the company:

The case will definitely have an effect on the DJs brand in the long term, leading brand analyst Richard Sauerman of Brand Alchemy said. …

But Mr Sauerman said he expected some women would show how they felt about the sexual harassment allegations by shopping elsewhere.

He said once this sentiment grew it could have an effect on the company’s bottom line, and then even its share price.

And indeed social attitudes surveys show that this kind of consumer behaviour takes place. The ABS General Social Survey 2006 found that over a twelve months period a quarter of those surveyed had ‘boycotted or deliberately bought products for political, ethical or environmental reasons’.

On the other hand this isn’t the first time in recent years that David Jones has been accused of sexual impropriety. In 2006 the Australia Institute accused it of ‘corporate paedophilia’ because David Jones allegedly used sexualised images of children in its clothing catalogues. Read the rest of this entry »

Investing in students

I’m hoping to soon get started on a paper about reforming Australia’s shambolic student loans system, so I was interested in a Marginal Revolution link to Lumni human capital financing.

Lumni invests in students in exchange for a share of their future earnings. Joe Clark wrote a Policy article on this a few years ago. From a student’s perspective, it has these differences from our HELP scheme:

1. With Lumni, the graduate provides an agreed % of his or her income for a fixed period of time rather than a fixed % of his or her income until the debt is paid off or the graduate dies. Successful graduates could end up paying much more under Lumni, while unsuccessful students will have their debts written off more quickly.

2. Lumni will only invest when it believes a return is likely – so presumably it will not invest in risky students (eg older students, those with weak prior results) or low-return qualifications (eg Arts). HELP will lend to anyone regardless of risk. As Joe points out in his article, one advantage of seeking a return on investment is that there will be more research into the prospects of different degrees, institutions, and types of student. This could help guide students even if they don’t take out a loan. Read the rest of this entry »

Melbourne’s disappearing milk bars

Last Saturday, as I have almost every Saturday over the last decade, I went into the milk bar at the corner of Barkly St and Canning St in Carlton to buy the papers. On the verge of tears, the owner told me that this would be the last time I’d do so. Not by choice, they were closing down.

milkbar4(2)
The cnr Barkly St and Canning St milk bar on its last trading day, 20 December 2009
Read the rest of this entry »

Politician admits wasting billions of dollars

Ok , an ex-politician. But even among ex-politicians, how many admit to being partly responsible for wasting billions of taxpayers’ dollars, as former Hamer and Kennett government minister Rob Maclellan does in The Age his morning?

The sources of this waste are Alcoa aluminium smelters near Geelong and in Portland, a Victorian coastal town. By the time current contracts expire The Age estimates that these smelters will have received $4.5 billion in electricity subsidies.

As Maclellan now concedes, ever agreeing to this arrangement was a ‘collective moment of insanity’ around the cabinet table. There are many such moments, but at least Maclellan is, albeit far too late to do anything about it, admitting to this one.

Why aren’t political beneficiaries declared?

Over the last few days, the SMH has run a good series of stories on the dodgy deals that have enriched taxi licence holders like Reg Kermode.

The taxi industry is based on an anti-competitive licence system that restricts the number of cabs on the road, and delivers windfall profits to people who bought licences in the past. This is all well-known (I have complained about it before, as have several people associated with the CIS and many others.) The SMH scoop – or at least I never knew about it before – is that Kermode was given about $20 million worth of licence plates for free. It also reports that:

[The Rees government] has continued to keep secret the list of taxi plate owners who trade their licences on a market worth as much as $2.2 billion.

The SMH quite appropriately points out that Kermode is a generous donor to the NSW ALP.

But the secret licence system shows the real hole in the political disclosure system. The problem is not that $1,000 donors pose a threat to the integrity of the policymaking system, as the federal government believes. It is that information about who benefits from special government deals is often very hard to get. Unlike political donors, there is no central registry of political beneficiaries. Though their identities can – with exceptions like the taxi licence holders – generally be discovered, it often takes a lot of digging around, and in this case investigative journalism. Read the rest of this entry »

Why pay more at Borders?

This week if you download a coupon you can get 30% off a full-priced book at Borders. They regularly offer similar kinds of specials.

So far as I know, this is a novel strategy for booksellers in Australia: not discounts on a particular book, and not discounts across-the-board, but one discount on a book the customer chooses (is there a unique barcode for each coupon which protects against fraud?). If the strategy is to get people into the store it is a clever one. It allows all books to attract customers rather than just the specials, but unlike across-the-board discounting it increases the yield on additional purchases.

What Borders don’t tell you is that sometimes you need a coupon for shopping at Borders to make sense. My weekly notice from Borders, which I received yesterday, advertises Colm Toibin’s new novel Brooklyn for $36.50. A Toibin novel is likely to be worth $36.50, but there is no need to pay this much. Other bookstores are selling it for the publisher-recommended price of $32.99.
Read the rest of this entry »