In terms of economic development, developed countries are constantly upgrading and updating their education system framework. Based on the experts' review, the Australian government has taken the initiative to introduce higher education reforms to strike the right balance. In the selected article, Watson et al. (2017) reviewed the reforms done on the higher education system in Australia. According to the article, the recent higher education system reform will save AU$ 2.8 billion for the Australian government over the next five years. In the meanwhile, the Federal budget introduces the higher education reforms as the government has confirmed significant cuts in the educational packages.
Precisely, under the new reforms, students will have to pay more amounts to complete their higher education courses. The announcement of the government mostly impact the students seeking higher education in Australia as university fees have been increased at a substantial rate between 2018 and 2021 (Watson et al., 2017). The latest education reform announced in the Federal budget will significantly benefit the Australian government although hike in prices in higher education will add excess burden on the students. In this particular study, the economic impact of the higher education system reform in Australia has been analysed providing evidence.
In the recent Federal Budget announced by the government of Australia, it is proposed to increase students’ contribution in the higher education system. In terms of percentage, the contribution of the students will be increased by 1.82 percent every year since 2018. In 2021, the contribution of student in the higher education will be enhanced by 7.5 percent (Bexley, 2017). Under the reform status, students have to pay 46percent instead of 42 percent contribution to obtain a degree in the universities. As per the estimations, the cost of a graduate degree in Australia will rise from $2,000 to $3,600 (Bexley, 2017). Apart from the rise in fees, the government will cut short teaching funding by 2018 in the next couple of years as well.
Through the scanning of the overall scenario, the repayment threshold of education loans will also be reduced. So, the students have to take extra burden to repay the loans faster under Higher Education Contribution Scheme. In the reform, the government has estimated to include 2.5 percent efficiency dividend in 2018 and 2019 (Watson et al., 2017). Evidently, the government has proposed school funding to be boosted by $18.6 billion over the next ten years. Under the current circumstances, the impact of the higher education reform on Australian economy has been described as follows.
The Australian Education sector is estimated to rank as the third largest export category earner for the economy. According to the Australia Bureau of Statistics, every international (including their family and friends visitors) contributes around $28,921 annually to the Australian economy (Waud, 2015). Hence, it can be seen that the Australian Higher Education Sector is one of the major revenue generating industry for the economy. By considering the fact of increasing price of higher education in Australia, it is expected by the economist that a fall in the quantity demanded by the international students can be evident in the upcoming future. Though the Australian Government is expected to save around AU$ 2.8 billion in the next five years, the fall in the demand for higher education among the international students in Australia will definitely impact the revenue earned by the other industries in terms of education services (Turpin, 2016).
By applying the theory of demand it can be clearly seen that the hike in the price for higher education in Australian market will directly impact the quantity demanded by the student. For instance, an international student with limited resource will choose some other market for completing higher degree courses in place of Australia in order to successfully complete the study within the budget (Piracha, 2014). Hence, a hike in the price of higher education in Australia will directly impact the quantity demanded that will reduce the number of international student in the upcoming years. A figure has been presented herein below for further understanding:)
It can be seen from the above diagram that the rise in the price of higher education in Australia will lead to the fall in the quantity demanded. For instance, a hike in the price from P2 to P1 will result in a fall in the quantity demanded from Qe to Q1. However, it is important to note that education is a necessary service that has inelastic demand. Hence, the revenue loss due to the fall in the quantity demanded will be comparatively less than the revenue gain due to the rise in price in the education sector of Australia (Gamage and Shangwu, 2016). On the other hand, the revenue earned by the other sectors due to the visit of the international students and their family in Australia will reduce in the upcoming years. Furthermore, a hike in the demand for higher education in other markets such as the United States and the United Kingdom will be evident in the upcoming future due to the rise in the price of higher education in Australia. A diagram has been presented herein below for further understanding:
It can be seen from the above figure that the rise in the price of higher education in Australia will provide competitive advantage to the higher education sector of other economies resulting a hike in the quantity demanded that will further lead to a rightward shift in the demand curve from D to D’. Hence, the Australian Government must take necessary steps to improve the current balance of the education sector and attract international students to earn foreign revenue. For instance, the Australian Government can provide better loan schemes to the international students for studying higher degree courses in the economy (Coombe, 2015). Furthermore, better technology and competitive placements can be provided to the students in relation to the price increment to attract more students in the future.
From the above discussion, it is understandably clear that recent education reforms in higher education are not helping to the students by any means. Due to the education reforms, the higher price of education means that students will require more borrowing for obtaining a degree. At the same point in time, the payback period of the education loan will be cut short. Meanwhile, the proposed changes will be significantly positive for the government as funding in education will be reduced by the government. Conclusively, the structure of increased education fees and faster terms of loan repayment will certainly save government spending.
Bexley, E. (2017). Higher education reform: small changes for now but big ones to come. [online] The Conversation. Available at: [Accessed Aug. 2017].
Coombe, L. (2015). Australian higher education reforms – unification or diversification?. Journal Of Higher Education Policy And Management, 37(2), 125-143.
Gamage, D., and Shangwu, Z. (2016). A Study on Recent Reforms, Current Issues and Policies Within the Australian and Chinese Systems of Higher Education. Education And Society, 21(2), 19-35.
Mauch, J. and Sabloff, P. (2015). Reform and change in higher education. 7th ed. New York: Garland Pub.
Piracha, A. (2014). The NSW (Australia) Planning Reforms and their Implications for Planning Education and Natural and Built Environment. Local Economy, 25(3), 240-250.
Turpin, T. (2016). Academic research evaluation in Australia: some implications of proposed higher education reforms. Research Evaluation, 9(1), pp.37-46.
Watson, L., Chapman, B., Croucher, G. and Clarke, K. (2017). Federal Budget 2017: what's changing in education?. [online] The Conversation. Available at: [Accessed Aug. 2017].
Waud, R. (2015). Economics. 7th ed. South Melbourne: Longman.