An Economic Analysis of the Australian Education Industry Reforms

This economics assignment examines the recent reforms in the Australian education industry, focusing on the government's plans to cut higher education budgets and increase fees. The report analyzes the potential impact of these reforms on students, including the effects of increased fees, changes to HECS thresholds, and reduced loan repayment periods. It explores the economic implications using the theory of supply and demand, discussing how fee hikes may reduce demand for higher education and impact revenue. The assignment also considers the potential rise in unemployment within the education sector due to budget cuts, and suggests measures the government could take to mitigate these negative effects, such as offering attractive education loans to international students and reviewing the payback threshold structure for domestic students. The report concludes that the reforms could negatively affect the quality of teaching and the ability of students to acquire higher degrees, and calls for a review of the reforms to address the issues in the Australian education system.

ECONOMICS ASSIGNMENT 1
Reforms in Australian Education Industry
Student’s Name
Course ID
University
Date

ECONOMICS ASSIGNMENT 2
The Australian Education Industry is a major contributor of GDP due to its foreign
earnings from international students. According to the Australian Bureau of Statistics, the higher
education sector of Australia has contributed around $21 billion in 2016. However, in the recent
years, the policy reforms made by the Australian Government in the higher education sector have
created a chaos in the public. Baker (2017) in his article has reviewed the pre-budget
announcement of the economic policy reforms made by the Australian Government in the
education sector. On the basis of the article, it can be seen that the Government is planning to cut
$1.2 billion from the higher education budget that will directly impact the education price in the
economy.
Additionally, the government has planned to cut the HECS threshold by more than
$10000 (Baker, 2017). As per the new Federal Budget the higher education fees will increase by
around 7.5 percent. By observing the article, it can be clearly seen that the current reforms in the
education industry will adversely impact the student studying higher courses in Australia. The
increment of the fees structure and shortening of the loan repayment period will put pressure
over the students. Hence, the issue caused by the economic reform in the Australian Education
sector has been discussed in details in the paper.
According to Baker (2017), the higher education packages will apply to a 2.5 percent
efficiency dividend for the universities. Additionally, the shorter period of time provided to the
students to repay their loans will create severe pressure over the students. Baxley (2017) said that
the higher education fees will increase by around $2000 to $3600 per year, which will create a
major pressure of the student. Furthermore, the cut-off of the HECS loan amount from $55,874
to $42,000 will further create problem for the students. Jill Molloy (National Union of Students
Welfare Officer) said that the student’s felt “screwed over” due to the latest decision taken by the

ECONOMICS ASSIGNMENT 3
Australian Government (Baker, 2017). She also said that the Universities have to cut their price
and costs in order to meet the crisis situation (Baker, 2017). However, the cut in the budget will
impact the quality of the services rendered by the Universities. For instance, students have to
face larger class sizes, less support in the libraries and fewer support services due to cut-down of
number of staffs.
According to the reports, the education industry in Australian can be identified as one of
the leading contributors to the real Gross Domestic Product. Moreover, the international students
contribute significant revenue by pursuing higher education in Australia (Gamage, 2015). In
terms of current reforms in higher education system, price hike of degree courses may lead to a
fall in demand as far as higher education is concerned. Due to increased fees and $1.2 billion
fund reduction from universities, a number of things can change in the higher education sector in
Australia over the next five years (Baker, 2017).
In terms of economic point of view, the theory of demand and supply can be taken into
account to understand the economic impact. In the meanwhile, the increased university fees in
the higher education can create an adverse effect on the quantity demanded i.e. the numbers of
students seeking higher education in Australia will reduce (Turpin, 2016). In the new Federal
Budget, Australian government reduced the government spending on higher education by
increasing the university fees. Hence, the excess burden of fees can also impact the overall
revenue earned from the education industry in Australia (Taylor, Stonebarger and Leven, 2015).
In the underlying figure 1, the impact of same has been stated as follows:

ECONOMICS ASSIGNMENT 4
Figure 1: Effect of rise in higher education cost on Australian Economy
Source: (Mauch and Sabloff, 2015)
Clearly, the diagram presented above clarifies how price hike in the higher education
system can create a negative effect on the Australian economy as the demand declines. Due to
decline in demand, the economy will surely observe a loss of revenue from the education sector.
According to the figure 1, as the cost of higher education is shifted from P2 to P1, the required
quantity has been cut down from Qe to Q1 recording a fall of demand (Mauch and Sabloff,
2015). Notably, being a necessity, education service has shown inelastic demand. Evidently, the
fall in demand in the education can contribute towards the loss of revenue (Gamage, 2012).
Besides, the fall in revenue of the industry, unemployment factor must be elaborated related to
the subject.
Under the higher education reform structure, the Australian government announced to
reduce education and university funds by $1.2 billion. Due to such stance, the spending structure

ECONOMICS ASSIGNMENT 5
of universities will be altered. For example, due to the shortage of funds, universities will force
to shut down many of the research projects that run under the government funding. Also, the
staffs of the universities may come under the fire as a significant number of jobs will be
terminated due to lack of funds. Meanwhile, the cut down in funds will increase unemployment
in the education sector as well (Bach, 2010).
In order to tackle the scenario, the Australian government must take the correct steps so
that the revenue from the education industry can remain intact. Precisely, international students
must be offered attractive education loans so that overseas students will not move to other
countries for higher education (Coombe, 2015). For domestic students, the payback threshold
structure for education loan must be reviewed under the current circumstances as higher fees of
universities will increase borrowings. In this way, the issue can be resolved in the near future.
By considering the above analysis and article written by Baker (2017), it can be seen that
the reforms introduced by the Australian Government will negatively impact the teaching system
of the nation and the ability of the students to acquire higher degree. Furthermore, the increment
in the higher education fee will force the students to contribute more to the GDP. However, the
fall in the demand for international education in Australia will negatively impact the education as
well as other related sectors of Australia. Hence, the Government must review the reforms and
introduce necessary measures to mitigate the issue in the Australian education system.

ECONOMICS ASSIGNMENT 6
References
Bach, G. (2010). Economis. 7th ed. Englewood Cliffs, N.J.: Prentice-Hall.
Baker, E. (2017). University students and staff protest $1.2bn in cuts slated by federal
government. [online] Canberra Times. Available at: http://www.canberratimes.com.au/act-
news/university-students-and-staff-protest-government-higher-education-reform-20170808-
gxrr39.html [Accessed Aug. 2017].
Bexley, E. (2017). Higher education reform: small changes for now but big ones to come.
[online] The Conversation. Available at: https://theconversation.com/higher-education-reform-
small-changes-for-now-but-big-ones-to-come-76978 [Accessed Aug. 2017].
Coombe, L. (2015). Australian higher education reforms – unification or
diversification?. Journal of Higher Education Policy and Management, 37(2), pp.125-143.
Gamage, D. (2012). Recent reforms in Australian higher education with particular reference to
institutional amalgamations. Higher Education, 24(1), pp.77-92.
Gamage, D. (2015). Recent Reforms, Current Issues and Policy Directions in the Australian and
Japanese University Systems. World Studies in Education, 3(2), pp.119-136.
Mauch, J. and Sabloff, P. (2015). Reform and change in higher education. 7th ed. New York:
Garland Pub.
Taylor, T., Stonebarger, T. and Leven, J. (2015). Economics. 4th ed. Chantilly, VA: Teaching
Co.

ECONOMICS ASSIGNMENT 7
Turpin, T. (2016). Academic research evaluation in Australia: some implications of proposed
higher education reforms. Research Evaluation, 9(1), pp.37-46.