The Australian government is considering the findings of a review into the future of its ¡®demand-driven¡¯ higher education system. Speaking in London on 28 April, the Australian education minister Christopher Pyne shared his thoughts on the state of the sector and the challenges and opportunities it faces. Here is an extract from his lecture:

Until 2012, Australian universities could not determine how many undergraduate places they would offer overall or in individual subjects, nor how much they could charge for their courses. While I have borrowed the term, ¡®Moscow on the Molonglo¡¯ (referring to the river that runs through Canberra) is an apt description of how we have regulated higher education in Australia.

To give credit where it is due, the previous Australian Labor Government, following a review led by Denise Bradley [former vice-chancellor of the University of South Australia], gave public universities the freedom to determine how many Commonwealth-supported undergraduate degree places they would offer. This is the so-called ¡®demand-driven system¡¯.

The demand-driven system did away with the concept of capping places on a Canberra-knows-best basis.

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It also saw a major expansion in publicly-funded undergraduate degree places in Australia. Last year, the equivalent of 577,000 full-time students had their tuition fees subsidised by the Australian government, an increase of more than 100,000 on 2009. They are subsidised both by government paying on average over half the cost of their tuition, the price of which remains set by government, and also through Australia¡¯s income-contingent loan scheme.

On coming to office last year, I commissioned a review of the demand-driven system by respected Australian education figures David Kemp and Andrew Norton [both of the Grattan Institute]. We have recently published their report. Kemp and Norton found that the uncapping of funded places was a significant net positive. But not without failings.

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The system prompted a rush to tertiary education by the less well prepared ¨C who, at a rate of almost 24 per cent, subsequently dropped out of university study.

To tackle this and generally to expand opportunities for students, Kemp and Norton have recommended extending the demand driven system from bachelor¡¯s degrees to higher education diplomas, advanced diplomas and associate degrees.

To promote competition and also to support all Australian students studying for higher education diplomas and undergraduate degrees, they urged that Commonwealth-supported places be extended to private universities and non-university higher education providers. Non-university higher education providers include many public Technical and Further Education (TAFE) institutes, and private educational institutions, some not-for-profit and some for-profit.

Publicly-funded places would only be offered to such providers and courses that are approved by the Tertiary Education Quality and Standards Agency (TEQSA). While expanding opportunity, quality must be upheld.

Kemp and Norton concluded that making changes to the demand-driven system will expand opportunities for students, lead to further innovation in courses and modes of delivery, and boost the quality of teaching and graduates. We need all of that.

I am considering the government¡¯s response to Kemp-Norton in the context of the coming Federal Budget, alongside input from our National Commission of Audit¡­ I will not pre-empt the budget today¡­ but I repeat what I have said before: ours is a deregulatory government.

I can assure you unreservedly that the coalition government will continue to take steps to set higher education providers free, provide them with more autonomy, and challenge them to map out their futures according to their strengths.

We are already embarked on some of that, stripping away burdensome regulation and excessive reporting requirements.

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Accountability for public and private funds is entirely appropriate. But accountability should be about protecting quality and safeguarding public trust, not about exercising command and control from the centre. This is the basic philosophical difference between the current Australian government and that which it replaced. Labor sees an innovation and says ¡®regulate it¡¯, the coalition sees an opportunity and says ¡®seize it¡¯.

The onus is also on us to trust educators to know their work ¡ª to leave them the space to achieve excellence by working in partnership with their students, communities, staff, and other institutions.

Government investment alone is not enough to ensure a well-functioning higher education sector.

The reviewers made a number of suggestions to address fiscal sustainability concerns.

In striving for a fiscally sustainable system, and in trying simply to keep up with demand for public education in particular, we have sometimes lost sight of the need for a relentless focus on autonomy, quality and opportunity.

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While I am making no announcements today, let me make it perfectly clear ¨C the recommendations of the Kemp-Norton Review with respect to expanding the demand driven system to diplomas and extending the Commonwealth Grants Scheme to students of all higher education providers have much to recommend them.

Respect for the autonomy of universities, and a commitment to quality and deregulation, are at the heart of the approach I have taken to supporting our higher education institutions.

This respect runs strongly through the traditions of my political party.

Most in this room will recognize the name of Sir Robert Menzies, Australia¡¯s longest-serving Prime Minister, from 1939 to 1941 and again from 1949 to 1966. He was a great friend of Britain. It is my view that he is also the founding father of modern higher education in Australia.

When giving the inaugural Wallace Wurth Memorial Lecture at the University of New South Wales in 1964, Sir Robert quoted ¡®with warm approval¡¯ these words which still ring true: ¡°Universities¡­are accorded a high degree of autonomy and self-determination on the ground that the particular services which they render, both to their country and to mankind in general, cannot be rendered without such freedom.¡±

When he first became Prime Minister in 1939, there were six universities in Australia and some 14,000 higher education students in a population of seven million.

By the time he retired after his second, post-war term in 1966 there were 16 universities and more than 91,000 higher education students.

Among many other achievements he initiated block grants for state-funded universities, and introduced national, or what we call Commonwealth, scholarships.

Sir Robert laid the foundations for the university system we have today in Australia.

In the late 1980s, the introduction of income contingent loans under the Higher Education Contribution Scheme allowed students, regardless of their economic resources, to contribute to the cost of their higher education.

This provided a legacy of sustainable access in the Australian university system. It is a legacy the coalition government will uphold¡­ This morning I met with your Secretary of State for Education Michael Gove and will meet this evening with your minister for higher education David Willets, whom I met for the first time in Canberra recently.

I know from our discussions that Britain is embarked on its own ambitious programme to meet the challenges at all levels of education ¨C with vigour and determination.

Australia is with you. We may be fierce competitors not only at the Adelaide Oval and Lords, but we know how to share the load.

We have adopted and grown countless characteristics of your education system. You have adopted aspects of ours ¨C most particularly, our student loans scheme.

It is my hope that if in the future I am invited back to address you, I will have much to share on how Australia is engaged in transformative innovation in education. It is our ambition to make a good system great.

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