Should the Coalition re-introduce full-fee undergraduate places?

In a rare campaign departure from populism, Opposition education spokesman Christopher Pyne has pledged to re-introduce full-fee places for Australian undergraduates if elected.

”It is absurd that … students from overseas are able to access Australian universities, and pay full fees for doing so, but there’s no percentage of Australian students that are entitled to do the same thing,” Mr Pyne told The Age.

However as Macquarie University VC Steven Schwartz correctly points out in the same Age article, the impending abolition of enrolment caps for Australian undergraduates signficantly undermines the rationale for a separate class of full-fee places. The main justification for the Howard-era policy was that because the number of places was held down by the government (through a mix of not wanting to pay subsidies for more students and not wanting to significantly re-arrange the historical allocation of places between institutions and courses), allowing full-fee places once all the HECS places were taken slightly alleviated mismatches between supply and demand.

In a demand-driven system, the supply argument would need to be that unis cannot afford to offer additional places at government rates, since the previous direct regulatory constraints on place numbers would no longer exist. While I have argued that under-supply is a risk of deregulating places without deregulating prices, it is a more complex and less compelling argument to make.

Indeed, the behaviour of universities during the partial lifting of enrolment caps this year has undermined my cost-sensitivity analysis. They have rushed to offer more places at sometimes less than the current rates (ie they have blown even the new higher limits, and are therefore receiving only student contributions at the margin). I have examined some possible causes here.

So while cost-related supply constraints may exist at particular universities or in particular courses, overall the system looks like it will be flooded with cheap Commonwealth-supported places. This will put added competitive pressure on the universities that do want to offer full-fee places. Also some major players in the previous full-fee market have shifted popular full-fee courses to the already-deregulated postgraduate market. Combine these two factors and we have a situation in which demand for full-fee courses is unlikely to be high – keeping in mind that the courses will still be the same mass-produced stuff given to Commonwealth-supported students, just at a higher price.

Even under the Howard-era scheme full-fee undergraduate numbers were only 12,000 full-time equivalents in 2008, or about 3% of public university Australian undergraduate enrolments. So I would predict that a revived Abbott-era scheme would produce low aggregate benefits, and not be worth the political price the Coalition would pay for them.

The time for piecemeal patch-ups is over. The problems of the entire Australian undergraduate cohort cannot be fixed by charging high fees to a minority of students. The whole price mechanism needs to be fundamentally reformed, and that must include fee deregulation for all students.

20 thoughts on “Should the Coalition re-introduce full-fee undergraduate places?

  1. I agree it is not a very good move politically.

    What’s going to happen with foreign student full fee places? Won’t there be no spaces left once local fully subsided students take all the places? In other words, won’t they be crowded out by all the local students as well? Or will they allocate a certain percent that foreign full fee paying students are allocated, essentially displacing local students?


  2. Tysen – Because international students are almost all full-fee paying they are in a different market. The incentive of the new system is actually to cut back on local students (since there will be no minimum number, as well as no maximum) and replace them with fee-payers. However the international student market is highly competitive and not very stable at the moment, and clearly many unis are going for domestic growth. And domestic students have many cheaper alternatives, as noted in the post.


  3. Wouldn’t a better move for the Abbott government simply be to further liberalise HECS repayment amounts?

    I don’t understand the logic for full fee paying places if the cap on CSP is removed. Full fee paying places buy entry with lower marks but if funding for the Unis is an issue then just increase the amount students need to repay.


  4. “Full fee paying places buy entry with lower marks”

    Though expanding the number of places by any method has the same effect.


  5. I don’t think it matters much what the coalition promises. First step to winning government is putting up a leader that could be prime minister.


  6. Or in one point that doesn’t seem to be made much in the saturation election coverage, there will almost certainly be a centre-left Senate majority during the next government, which should make it safe to vote Liberal in the H or R for people worried about WorkChoices etc.


  7. Don’t worry; Abbots going to deal with universities using full fee paying places to make money out of these pesky foreigners.


    I said it the day Abbott took over the leadership. I think Rudd would have destroyed him in an election campaign, JG replacing Rudd has more to do with Labor factional politics ( Rudd despised the factions, the factions despised Rudd) than any chance Abbott had. JG is going to turn a win into a landslide.


    It looks as if the greens are going to have the balance of power in the senate, that we are going to have a PM from the left faction of the Labor party ( the power of the labor right is slipping). All made possible because the Liberals where taken over by the mad right. A poor opposition results in a poor government.

    Will the Liberals sort themselves out or follow the American Republicans into la la land. As the old fogies that are the core of the mad right are in safe seats, and the moderates are in marginals it doesn’t look good.


  8. Charles – The polls clearly show that Coalition support trended up when Abbott took over. I’m not sure that this has much to do with ‘right’ or ‘left’, rather that Liberal leadership issues were resolved and they could focus on the weaknesses in government policy. Overall I would rate Abbott as an effective Opposition leader. The election itself is drearily centrist, as the commentariat has pointed out many times.


  9. Andrew

    Look a little depper than two party prefered, the polls clearly show that Labor lost votes to the Greens when Abbott took over, probable has something to do with how labor reacted to his right wing nuttery ( we can be just as stupid). The Liberal primary vote remained constant, the two party prefered vote depended on how you allocated green and “other” preferences. If important liberal thinkings think that the current situation is acceptable then the Liberals are really in deep shit.

    The election itself is dreary, labor is not being pushed anywhere, why should they do anything other than play it safe. The policy positions being hinted at but never said (by both parties) are designed to appeal to a northern moron, no doubt she is happy.


  10. Charles – The primary vote headed upwards as well..

    ‘Centrist’ in the sense that both parties are appealing to voters who are unlikely to have strong ideological beliefs (in the conventional left-right sense; a signficant analytical problem is that the views of ordinary votes do not map neatly onto the ideologies of intellectuals such as social democracy, conservatism or liberalism) and therefore could vote for either major party.


  11. “Though expanding the number of places by any method has the same effect.”

    Kind of. But it’s not an arbitrary jump. You’re not directly paying $X for X reduced ENTER like seems to exist with full fee paying places. Potentially everyone is paying more and at an equal entry barrier.

    If Arts CSP requires an ENTER of 90 and full-fee requires 80 then people that got say 89 are being told that they are less valuable than the wealthy person with an 80.

    If the number of CSP places increases and the repayment just goes up for CSP then those people that got an 88+ might get in now instead of a 90 and everyone that is deemed “worthy” or eligible pays the same price.

    I guess I don’t mind more expensive, lower score Unis in competition with high-score cheaper Unis but I don’t like the idea of different classes of entrance. I don’t get to pay extra to queue jump at McDonalds and my place in the line there isn’t even decided based on merit.


  12. Shem – I agree that liberalising all fees is by far the most sensible option, and that the alternative inevitably allocates public money on an arbitrary basis.

    On the other hand, I don’t think it is really a judgment (‘are being told that they are less valuable’) on someone to have a policy like this – indeed from this perspective, as meritocracy’s many critics have said, it is a worse system. Academic meritocracy it is more closely tied to genetics and family background than money, but bright people self-righteously believe that they are superior in the way that those who are just rich (or in this case, those willing to take out larger HELP loans) do not.


  13. “I don’t get to pay extra to queue jump at McDonalds and my place in the line ”

    You’ve never taken an aeroplane? Try upgrading yourself to business if you have lots of FF points, and find out the difference.


  14. The primary service of airlines is transport, though, Conrad. And business class passengers can’t kick an economy class passenger out of his seat by paying more (that I know of).

    I wouldn’t mind if some Uni students could pay more to get foot rubs every day after class. Extra services justify extra fees.

    I just think meritocracy is one of the principles that the education sector should stick to. I don’t think it should be enforced by government, but where alternatives are available government shouldn’t actively discourage meritocracy.

    Perhaps I’m just biased, though, because I was a student with a good memory that was capable of a good ENTER. Entrance score doesn’t translate to success at Uni, after all…


  15. Charles:

    I said it the day Abbott took over the leadership. I think Rudd would have destroyed him in an election campaign, JG replacing Rudd has more to do with Labor factional politics ( Rudd despised the factions, the factions despised Rudd) than any chance Abbott had. JG is going to turn a win into a landslide.

    Are you kidding. Rudd and his party’s poll collapse was faster and bigger than ko in the recent fight in Perth where the fighter was knocked out on 30 seconds.

    And Abbott’s poll numbers are higher than Turnbull who left with 14% approval.


  16. Full fee paying places buy entry with lower marks.

    The % of entrants admitted by reference to published UTAR schools is surprisingly low. Once you take account transfers, mature aged students, indigenous/rural/sporting/disabled/other students, those published “cut-off” scores become quite meaningless.


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