June 2010
Universities Australia commissioned Access Economics to undertake a study of the relationship between current Commonwealth funding structures and costs of various university teaching and research activities.
There is evidence that funding levels are often not aligned with the actual cost of different activities. Two-part pricing (where funding covers the marginal cost of activities) appears to be common, but the extent is uncertain. Cross-subsidisation (where activities are funded at less than marginal costs) may also occur in some research and teaching activities. Aligning funding to the cost of teaching and research activities assists efficient provision of these services to the community.
The aim of this study was to review Australian and international literature and existing cost studies to determine whether there is any evidence of two-part pricing or cross-subsidisation and identify other outcomes associated with the current and proposed university funding models. The report:
- discusses Australia's current university funding model for teaching and research (including a discussion of the evolution of the funding model) and its associated outcomes
- outlines proposed changes to the Australian university funding model and discusses their likely impact
- discusses university funding for teaching and research and associated outcomes (including any evidence of two-part pricing or cross-subsidisation) in the US, the UK, Canada and New Zealand
Having reviewed alternative university funding models, Chapter 5 of the report develops a taxonomy to facilitate comparison of the alternative models. This chapter also discusses how changes to Australia's funding model may affect outcomes based on experience overseas with alternative funding models. Chapter 6 outlines a set of guiding principles for a cost-gathering exercise.
To read the full report, download the PDF below.
