Julie: Of course, it costs a lot of money to...for the government to run a free education
system. And if you're not getting the equity outcomes, which is ultimately the reason why
you...a government would fund that system in the first place, well, they needed to be
another way around it.
Jason: So I think one of the things that would be most interesting to just sort of start
off with, and I think a lot of people in U.S. audiences don't understand, is Australia used
to have a free college, what we would call in this country free college or free university,
in the 1970s, and decided to abandon that. Let's start there.
Julie: Okay. So back in the 1970s, we had a Prime Minister called Gough Whitlam. He
was a transforming, larger-than-life character and he changed the country. He modernized
Australia. One of the things he did was introduce free university, so university fees. And there
was a feeling that people from disadvantaged backgrounds flooded into universities as a
result of the free tuition fees. As it turned out, by the 1980s, the government had realized
that that wasn't actually the case. The numbers increased dramatically, but it went from elite
to not quite so elite, but still, it was a lot of rich kids going to universities and
the working classes hadn't exactly flooded through the doors as expected.
So by the time we got to the mid-'80s, we had another Labor Government, this time run
by Bob Hawke. And they were concerned about the fact that the poor or the working poor
was subsidizing the tuition fees of the wealthy. So they had to work...find a way of how to
reintroduce fees without disadvantaging poor people, and also, they had to keep the Gough
acolytes, so the true believers on the side, because, you know, there was a lot of people
who still believe that Gough was God, basically, in Australia.
Jason: I'm sure, for U.S. audiences, this is a little bit surprising because, as you may
know, we're having this debate now about free college, as a way to actually increase access
for underrepresented, underserved students. But what you're saying is that in the '70s,
when you had free tuition in Australia, it wasn't...it didn't produce the results to
the extent that everyone thought it would in that.
Julie: There was a very strong kind of mythology among Australians of that generation, of which
I'm one of them, that it did increase access. And there's a lot of people will say that
they went to university because of Gough's free tuition, but the numbers just don't really
stack up. There was a very strong and powerful, you know, scholarship system that preceded
that. So people like me, who came from the working poor, would have still gone to university,
and I would have been on a scholarship. I wouldn't have been disenfranchised from the
system.
So the problem was that it didn't increase the number of, basically, people in the lowest
quartile and that they were the people who were subsidizing the relatively wealthy to
go to university. It needed to be more equitable. And of course, it costs a lot of money to...for
the government to run a free education system. And if you're not getting the equity outcomes,
which is ultimately the reason why you...our government would fund that system in the first
place, well, they needed to be another way around it.
And it also meant that the university system couldn't grow. They couldn't go into massification.
It had to remain relatively elite because they just couldn't afford to increase the
number of students going.
Jason: Yeah. And I think that's a thing that we sort of miss here is this, it's free, but
only certain people get it. Right? So it sounds like you're saying there's a sort of like
a capacity constraint because it's expensive.
Julie: The enfranchised get it, you know, the fortunate get it, because they know how
to, you know, how to work within the system. And if it is constrained, if the capacity's
constrained, it's those people, it's the advantaged who get more advantage as a result of it.
Jason: And they have the high test scores to clear the...
Julie: Yeah, exactly. Yeah, yeah, exactly.
Jason: So this system of free starts to come under criticism in the '80s.
Julie: Well, it didn't come under criticism. So there was a great deal of belief in Gough
and what Gough did.
Jason: The Prime Minister at the time?
Julie: The Prime Minister, Gough Whitlam. He was only prime minister for three years,
the early 1970s, from '72 to '75. And during that time, he introduced free, you know, on
tuition fees, universal health care, you know, open relations with China, bought Jackson
Pollock's Blue Poles for £1 million, which outraged the nation, indescribably. So he
was very much a reforming prime minister and he's, as I said, he modernized Australia in
lots and lots of ways. And there wasn't particularly a lot backlash against tuition fees.
But by the time we got to the next Labor Government run by Bob Hawke, which again was another
reforming government, and on sort of the left, centrist-left, I guess, the equivalent of
your Democrats, that they realized there was a huge cost. They wanted to do a lot of things
with the country. They wanted to modernize again, and they realized that the cost of
running a free education system stopped them also from opening up, from massifying the
systems. So they had to find a way to reintroduce fees without upsetting the true believers,
the Whitlam believers, but also get many more people from disadvantaged backgrounds into
the system.
Jason: So this is 1980s, early '80s?
Julie: Hawke was elected in 1983, I think. And so by the mid-'80s, they were definitely
talking about ways in which to massify the university system.
Jason: So yeah. And I think that's interesting for U.S. audiences too that you have a center-left,
politically center-left government that is looking at the free university system and
saying that this is just too limited to the enrollment...who can enroll...
Julie: You've got to remember, this is the government that also, you know, took...just
unleashed the Australian dollar and put it on the free market, that also took all subsidies
and tariffs off all our exports. So it was a very, very free market government. They,
once again, completely transformed the nature of Australia. Modern Australia today has everything
reliant on what happened during the Hawke era.
Jason: Interesting. And so it was this government that sort of came to realize, and see if I
can get you to explain that, that in order to expand the number of seats that were available
at universities, they were going to have to do away with the free tuition or fees, as
you call them.
Julie: Absolutely. So they needed to find a way through that. They couldn't, from an
ideological point of view and from...they couldn't introduce fees, full fees again,
because that would just automatically send, you know, a signal to the market that poor
people couldn't afford to go to university. They probably couldn't afford... They couldn't
afford a big scholarship system, if they wanted to massify the system. So they had to find
a way through that, how to reintroduce fees without stopping poor people from going to
university.
And the way they did that, which I think is a piece of policy genius and I think it's
remarkable piece of policy, is that the then education minister at the time, a guy called
John Dawkins, found a young economist called Bruce Chapman, who had just arrived back in
Australia with a freshly-minted PhD from Yale, and together, they developed something called
income-contingent loans. They're in a number of countries now, but they were Bruce Chapman's
idea.
And the idea was that you could reintroduce fees and the government would pay a certain
proportion of what the fee was under what's called the Commonwealth Grant Scheme, and
the students would pay another percentage of it, which meant that they had a debt, but
they didn't start repaying the debt until their income hit a certain threshold.
Jason: So the government, the Australian government continues to subsidize the universities, but
now students have to pay tuition. But they actually don't have to put any money upfront.
Julie: So there's no money upfront and there's a safety net, so that if you don't benefit
from your university education, if you don't get a great job that pays... And the threshold
was quite high.
Jason: Before you have to start paying back this loan.
Julie: Before you pay back. And so if you never get to that threshold or you move in
and out of that threshold, particularly for women who are working part time, maybe after
they've had children, that they only pay at that threshold. And the money, the other part
of the genius is it's collected through the tax system. It's a very simple system for
repayment.
Jason: I think this is where many people in the United States, this is the part of the
Australian system that they know most about, or maybe the only part that they hear about
is the loan... Students get a loan, everybody can get a loan, they don't have to put any
money upfront to pay for college, and then they pay back based on their income and only
after their income reaches a certain level.
But I think one thing that, I think, piece of context that's missing there though is
that these were...this form of paying tuition or deferred tuition, as some people call it,
was a way to bring revenue into the universities to offer more seats. And so usually, we're
sort of focused on the mechanics of the loan, but I think there's still a limit to the number
of seats at these universities, right? So talk about that in the 1980s.
Julie: So in the 1980s, before the full of the introduction of income-contingent loans,
so what we call HECS.
Jason: So when the loans are introduced, who decides how many seats there are at a university...
Julie: Well, the government decided.
Jason: So explain that.
Julie: Well, it's hard to explain, really. The government... was a very bureaucratic
system in which the government capped the number of places, gave a finite number of
places in every single course and every single university in Australia. And that was obviously
a lot of courses. And if universities went above or below, I think it was about 5%, they
were then fined by the government for not meeting this exact number, so that it was
incredibly bureaucratic and stupid really, because if a university had a really great
law program, but a really ordinary science program, it couldn't enroll more students
in its law degree, where the demand was and might have people clambering to get into their
law degree and no one wanting their science degree, but they couldn't move places between
those two systems. So they were stuck with what the government assigned.
I'm not really au fait with how negotiations went between universities and the government,
but I get the impression that they probably weren't very constructive. And it was called
"Moscow on the Molonglo," the Molonglo being a river in Canberra and Moscow being a Soviet
city.
Jason: So there's sort of this complaint that sure, we have this, you know, very sensible
solution to the too few places under the free system. So we have this sensible solution,
very practical, where we're gonna...where Australia is going to give people income-based
loans, where they pay back the loan based on a share of their income. This will bring
in the revenue, there'll be more places available at the universities, which all seems like
a great idea. But I think what gets lost in the conversation is that as you're describing
it, even with these reforms, the government at this time was essentially determining how
many majors, how many science majors, how many biology majors you could have at a certain
university in a given year.
Julie: Yeah. And ultimately, you know, how many were being released, you know, at the
end of three years, because we got a three-year undergraduate system, onto the market after
that. So, you know, it was highly controlled and probably not very scientific at all. But
that meant the government could control costs. It knew exactly how much the higher education
sector was going to cost it every single year.
Jason: I think that's key.
Julie: It is.
Jason: I think that's key, that this is a...it is a form of rationing, essentially.
Julie: Yeah, absolutely.
Jason: Right. So it's a heavily subsidized system, but it's expensive. Even with the income-contingent
loans.
Julie: It's not as subsidized as it was though under free education.
Jason: Sure. We'll get there. That's where we're headed. By the way, I think in the United
States, where I think people will be shocked to know that Australia used to limit how many
bachelor's degrees you could have, as a way of controlling costs, as you said.
So flash forward to sort of 2005, 2006, 2007, and I remember this era very well, where there's,
sort of, you know, there's a global economic boom. And even in the United States, everybody
is talking about global competitiveness. And China's producing so many engineers and everybody's
going to have a bachelor's degree and we need to compete. And when I look at what was happening
in Australia around the same time, it looks like a similar theme, and there's a desire
again for more capacity at universities. Is that a fair...?
Julie: Kind of. So it was capped...once again, we've got another Labor Government after years
of 11 years of John Howard Government, of conservative government. And then in 2007,
we had the Kevin Rudd Government, get elected in... Kevin 07 was the t-shirt logo. And once
again, the country was very wealthy. We'd made a lot of money out of digging iron ore
out of the ground and shipping it off to China. So there was a lot of money in the system.
Once again, university places were capped, so we weren't producing more graduates for
the system. And what happened in 2007 is that Rudd's education minister was Julia Gillard,
later prime minister, yeah, later prime minister, and who commissioned a review by a former
university vice-chancellor called Denise Bradley. And that review came up with 46 recommendations.
Jason: A review of the higher education system.
Julie: A review of the higher education system because obviously, there were problems, right?
You know, about capacity, about capacity building.
Jason: So still concerns about capacity around 2006 and '07?
Julie: Well, yeah, because of the change in government, so they needed a new...they just
needed to throw some fresh light on what was going on. So Denise Bradley undertook a major
review and her...she came up with a number of recommendations, the chief of which was
that university undergraduate places for domestic students be uncapped.
Jason: So her recommendation is, "We have to lift these caps that the government has in
place," so who decides who gets in?
Julie: The universities decide who gets in. So universities in Australia are self-crediting.
I guess like the American system, they decide who...how many people they enroll and what
the academic standards of the people coming in have.
Jason: So this is a recommendation that comes out of this review of the higher education
system.
Julie: Called the Bradley Review.
Jason: Called the Bradley Review, okay. And now in the U. S., we have lots of panels and
commissions and reports and reviews and nobody does anything with them. They sit on shelves.
But what happened in this case, with the Bradley Review?
Julie: Well, what happened in this case is they got to work very quickly. Julia Gillard
was an extraordinary effective education minister. Gotta remember she was also running women...she
had a portfolio for women. I think she had the portfolio for industrial relations and
for all the education sectors. She was incredibly productive. They got to work and they started
implementing the recommendations of the Bradley Review. I think they ended up actually meeting
about half the recommendations and a few of them got wound back fairly quickly, but...
And chief among those are the targets.
Bradley also set a couple of targets. One was that she wanted 40% of people aged 25
to 34 with a bachelor's degree by 2020, and 20% of low...what we call SES, so low socioeconomic
students, so financially disadvantaged students in the university sector by 2022.
Jason: Okay. So the goal here... So it's more bachelor's degrees because they've been capped,
and more access for low-income...students from low-income families.
Julie: So there was a very strong equity dimension to this. It was a very strong, the equity
dimension. And also, you know, just increasing the number of places because, you know, what
Bradley saw was, you know, the knowledge economy coming down. It was, you know, before we started
talking about the Fourth Industrial Revolution and Industry 2.0, but we could see that there
was going to be a need for more people with bachelor's degrees in the sector.
Australia is a very services...despite the amount of iron ore and coal we dig out of
the ground, we're a very service-oriented society and we're a very urbanized society
and so we needed more people with bachelor's degrees. And so that's what they saw and that's
what they were aiming for.
Jason: And the solution to that problem is to remove the sort of centrally controlled caps
from government and let universities decide. And this is called the demand-driven system.
Julie: It's called the demand-driven system.
Jason: Sounds very market oriented. And although, you know, I'll remind our listeners that the
universities are still... Universities would now be in charge. There are some people watching,
you would say, "Oh, well, I mean, you know, six and one-half a dozen, the other, the government
setting caps, the university setting it, you know, what have you really solved?" But it
does seem like a radical change in how this is done. But so students though would still
be able to get these loans.
Julie: Students could still get the income-contingent loans, yup.
Jason: And so describe how this system starts to roll out there.
Julie: Okay, so they started uncapping places in 2010 onwards. And so what they did for
the first two years was allowed the universities to increase by 10% and they would pay the
Commonwealth Grant Scheme and also the HECS contingent of that.
Jason: The loans, the HECS are the loans.
Julie: The loans of that, by 10%, but universities could enroll as many as they wanted. They
just wouldn't get the government contribution. They would just get the student contribution.
Jason: So sort of a phase-in to start.
Julie: So it was a phase-in. And the first year went, you know, fine, a bit quietly,
a couple of universities were a bit enthusiastic. By the next year, a number of them were getting
quite enthusiastic because they realized that by the time you got to year three, that they
would have the full amount. So by 2012, the caps came off completely.
Jason: Hey, everyone. Thanks for watching Part 1 of our discussion with Julie Hare. If you
enjoyed what you saw, remember to like the video or leave us a comment. And if you want
to see more, check out Part 2.