The Australian government's review of its higher education system - with the federal budget looming - could not have come at a more opportune time. Lacklustre productivity growth and significant skills shortages are major concerns for Australian businesses, which in turn are placing increased demands on Australia's tertiary education system.
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The Australian Universities Accord released its final report earlier this year, and against this economic backdrop it is no wonder the reception has been broadly positive. As part of our report for the Accord, we estimated 82 per cent of jobs - about 15.9 million - will be tertiary-educated roles by 2050.
While this number might seem high to the naked eye, it's driven by the fact Australia's fastest-growing sectors (health, professional services and education) also have the highest rate of tertiary education.
The economy is estimated to need an average of 960,000 qualifications each year to meet this demand. In addition, as the ageing population increases rates of retirement, and mobility within the labour force increases, there is increasing demand for upskilling and reskilling.
Achieving 15.9 million tertiary-qualified roles by 2050 is no small feat for the sector and requires significant growth without compromising quality.
But the Accord's report is just the start of the journey. Its recommendations provide the foundations for the sector to take on this challenge.
Through our discussions with tertiary education and industry leaders, we believe there are three core areas we need to get right if Australia is to achieve the ambitious targets required to meet the future demands of the labour market.
Funding the sector effectively in a cost-constrained environment
The Accord's proposal to implement a needs-based funding system that reflects the cost of delivering education, particularly for equity cohorts and regional education providers, is a step in the right direction. However, there are no additional incentives for universities to improve the quality of education above the industry standard. Without any linkage between funding and education quality we risk that universities are incentivised to fill seats instead of providing best-in-class education.
Universities also need to look inward to how they deliver high quality education efficiently. The financial viability of Australian universities is under pressure, with just five of the 29 who reported their 2022 accounts being in surplus. Cutting through red tape and using technology effectively to deliver a high-quality education experience to more students is critical for universities to improve their own productivity.
Ensuring settings provide labour market flexibility
We estimate 30 per cent of labour market demand for qualifications will be driven by upskilling and reskilling requirements over the next 30 years as an ageing population and a changing industrial make-up drive lifelong learning across the working aged population. Strong cross-sector integration and collaboration between higher education and vocational education will be essential for filling existing and emerging skills gaps in industry, particularly due to the growing nature of skills-based hiring practices.
The Accord has recognised the need for flexibility moving forward, including recommendations for the development of a national skills passport and modular stackable skills.
One of the largest barriers to more flexibility within the system are the administrative processes required across the various regulatory bodies, particularly when both the VET and higher education sector are involved. The creation of an Australian Tertiary Education Commission to oversee the significant industry transformation is important, but its success will be based on how it can alleviate the barriers within the system and not add further red tape or complexity. It will also need to recognise cross sector integration is not one-size-fits-all and a targeted approach is necessary.
Keeping students front and centre
It is important when looking to the future of tertiary education we don't forget there is no tertiary education industry without students. Attracting students and supporting their attainment of tertiary education, importantly with the skills Australia needs, is critical to the success of the industry.
There is a fundamental misalignment between the skills students are choosing to study and the skills the Australian labour market needs. Current shortages in the construction sector are limiting the industry's ability to deliver Australia's infrastructure needs, while the shortage of aged care workers is putting the operation of facilities at risk. Our analysis highlighted nearly all industries are likely to experience a significant gap between what higher education qualifications industry needs and what the current trend in qualification attainment is likely to provide.
The Accord places significant importance on meeting the skill needs of the Australian economy, but further work needs to be done to ensure students are choosing the areas of study that provide the best outcomes for themselves and the needs of Australia's labour market.
- Emily Dabbs is the head of macro consulting for independent industry forecaster and economic analysis company Oxford Economics Australia.
