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 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:
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 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.
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Baker, E. (2017). University students and staff protest $1.2bn in cuts slated by federal government. [online] Canberra Times. Available at: [Accessed Aug. 2017].
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Mauch, J. and Sabloff, P. (2015). Reform and change in higher education. 7th ed. New York: Garland Pub.
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Turpin, T. (2016). Academic research evaluation in Australia: some implications of proposed higher education reforms. Research Evaluation, 9(1), pp.37-46.