careful what you wish for: why the market-based demand driven system is better than the alternatives

Professor Andrew Vann is Vice-Chancellor of Charles Sturt University and a Board member of Universities Australia.

23 February 2017

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From time to time over the past few years, we’ve heard the occasional call to end the demand driven system for university places. 

Yet what critics of the DDS are seldom asked to explain is precisely what they propose as an alternative.

It’s a fascinating question, because invariably it leads back down the path to the old-style central planning models of the past. 

Back to an era when public servants tried to predict labour market needs five, ten and twenty years down the track. And how did that go? Spoiler alert: they weren’t particularly flash at it.

Tellingly, there seems little Ministerial appetite for a return to those days.

In an interview on Sky News at the end of January, Education Minister Simon Birmingham was crystal clear on this point. 

“It is important that … we don’t go back to an era where government bureaucrats sit in a dark room and randomly allocate places in different courses to different universities; that wouldn’t be a step forward,” he said.

Spot on. 

Would we really want to abandon a system in which students make decisions about the careers and qualifications they want to pursue – and hand those decisions about their lives back to federal public servants? I suspect not.

Beyond this crucial consideration, there are many other reasons – both economic and social – why we shouldn’t reverse this historic policy of broader access to university.

1) Australia’s tertiary attainment targets are roughly on par with other developed nations and similar economies. If you look at the OECD Education at a Glance 2016 report, we are now roughly at the OECD average for first time graduates as a percentage of our 25-34 year olds. This puts us in line with New Zealand, Switzerland, Iceland and Finland - whose education systems we often idolise.

2) The market is working – the growth in commencing enrolments has stabilised over the last couple of years. Growth has not continued unabated. Indeed, growth in commencements over the last couple of years now seems to be below population growth. 

3) The labour force needs of the economy will require more skilled workers into the future, not fewer. The Deloitte modelling done for the sector in 2015 projected the Australian economy would need another 3.8 million skilled graduates by 2025. 

4) The previous system was rotten for universities. Before the demand driven system, universities were penalised fully for under-enrolment and only partially rewarded for over-enrolment. This made sense for Governments, which obviously didn't want to pay for students who weren't enrolled. But it meant that unis sometimes didn't receive full funding for students who were.

5) New campuses and new courses – like medical programs now as the only capped area – were intensely political. They tended to revolve around election campaigns. I would argue this is a headache that Ministers really don’t want.

6) Governments across the world have a poor record of predicting demand for skills and managing university enrolments to match. 

7) The demand driven system – along with HEPPP – has been absolutely pivotal to lift participation by low socio-economic status students and Indigenous students. When given their head, it seems universities want to do the right thing. Who knew?

8) Universities can now back themselves to succeed through innovation. It used to be the case that investing in innovation was a risky prospect because there was no certainty the Government would allow you to grow. That is no longer a problem. The DDS has focussed the minds of universities on where they should deploy their resources. Universities used to be criticised for being insufficiently focussed on the needs of students. I haven’t heard that criticism so much lately.

As a final point, universities have sometimes been accused of pursuing growth for its own sake. I don’t think that’s true. 

Major reviews of the Australian higher education sector have found that universities are underfunded when you look at the percentage of public investment.

To maintain educational quality, universities have sought economies of scale through growth, particularly to pursue significant innovation in learning technologies and to deliver more value to Australia through their research.

Australian universities have been kept lean over the last 20 years and their performance, and that of their staff, has been outstanding. 

We’ve maintained retention and graduation rates while steadily improving student satisfaction with teaching.

We’ve also improved equity, increased research productivity and impact, and grown one of the nation’s largest export industries. 

The demand driven system has sparked a new round of innovation in Australian universities – and put students in greater control of their own destiny. 

Rightly so. Because who is better placed to decide the best direction for their own education and careers than our students themselves?