Background: Labor's Ambitious Entry into Higher Education Reform

The Australian Labor Government, led by Prime Minister Anthony Albanese since May 2022, entered office with high expectations for revitalizing the higher education sector. Australian higher education, encompassing public universities, private colleges, and research institutions, plays a pivotal role in the nation's economy, contributing over $66 billion annually through the efforts of leading groups like the Group of Eight (Go8) universities. The sector educates over 1.6 million students yearly, drives innovation, and addresses skill shortages in fields like health, engineering, and information technology.

Key challenges inherited included chronic underfunding, over-reliance on international student fees, and distortions from the previous Coalition's Job-ready Graduates (JRG) package introduced in 2021. Labor pledged transformative change via the Australian Universities Accord, announced shortly after taking power, marking the first major review in over a decade. This initiative aimed to create a 'better and fairer' system by 2050, targeting metrics such as 50% of young Australians holding bachelor degrees and increased equity for underrepresented groups.

The Universities Accord: Promises and Partial Delivery

Released in February 2024, the Accord's final report outlined 47 recommendations spanning funding models, student access, research support, and international education sustainability. Notable proposals included establishing the Australian Tertiary Education Commission (ATEC) for oversight, introducing needs-based funding for equity groups, and a managed growth system to align student places with resources.

Progress by early 2026 shows mixed results. ATEC began interim operations in July 2025, and the 2024-25 Budget introduced elements like the Managed Growth Funding (MGF) system and a 20% cut to Higher Education Loan Program (HELP) debts effective June 2025, benefiting millions of graduates. Domestic student commencements rose 4.3% to 413,133 in 2024, with equity gains: First Nations students up 6.9%, disability up 11.4%. However, full implementation lags, with only 31 of 47 recommendations partially or fully actioned, leaving core funding reforms unresolved.

The Lingering Shadow of Job-Ready Graduates

One of the most criticized holdovers is the JRG scheme, which increased fees by up to 113% for humanities, arts, and law while slashing them by 62% for STEM fields like maths and agriculture. Intended to steer students toward 'job-ready' degrees, it failed: fewer than 2% shifted courses, but applications from low socioeconomic status (SES) students dropped 15%, exacerbating inequities as these fields attract more disadvantaged, female, and Indigenous learners.

The scheme costs universities $1 billion annually in lost revenue, equivalent to 33,000 places, distorting budgets and program viability. Labor MPs like Louise Miller-Frost and Carina Garland have publicly urged prioritization, calling it a 'failed' policy creating lifelong debts—estimated at an extra $10 billion. Education Minister Jason Clare deferred abolition to ATEC, potentially until 2027 or later, drawing frustration from experts like Professor George Williams, who warns it devalues critical thinking skills amid AI disruptions.

Funding Misalignments Straining University Budgets

Commonwealth Supported Places (CSPs) funding per student has declined 6% in real terms since 2017, despite a 2% rise in places to 623,675 in 2024. Misalignments plague the system: in 2024, 14 universities received no subsidy for ~16,000 CSPs delivered, while others were funded for undelivered loads. The Higher Education Continuity Guarantee (HECG), extended post-pandemic, ends after 2026 without resolving these gaps.

Over 40% of universities operated in deficit for most of the past five years, with average surpluses masking thin margins. The 2025-26 MYEFO cut future CSP funding by $400 million, projecting fewer funded places by 2028 than in 2021 despite Accord claims of +18,000. Indexation lags inflation at 4.1% in 2025 and 2.4% in 2026, compounding pressures.

International Students: Caps Curbing Vital Revenue

International fees comprise ~25% of revenue ($22 billion in 2024), subsidizing research and domestic teaching. Enrolments hit record 589,288 in 2024, up 17.7%, but Ministerial Directions and Net Overseas Student Commencements (NOSC) allocations—145,300 for 2025, same for 2026—impose soft caps. Visa tightenings since mid-2023 slowed growth amid housing and migration debates.

This reliance, concentrated on China and India, exposes vulnerabilities; policy shifts threaten surpluses needed for infrastructure since capital grants ended in 2019.

Research Funding: A Growing Deficit

Australia's Gross Domestic Expenditure on Research and Development (GERD) languishes at 1.7% of GDP (2023-24 low), with higher education subsidizing from general funds ($1.06 received per $1 spent in 2022). Block grants grew modestly 15% real terms 2014-2025, but competitive grants like ARC fell 18%. Go8 warns the 2026-27 Budget must address this to boost productivity.

• Universities spend 20% revenue on research but face indirect cost coverage shortfalls.
• International fees historically propped up R&D; caps risk cuts.
• Government R&D investment <2% of payments by 2025-26.

Real-World Impacts: Job Losses, Course Cuts, and Student Choices

Financial strain led to 3,500 job losses in 2025 alone, larger classes, and program axing—prospective students hit hardest. Attrition fell to 12.2% (2023 cohort), but completion rates hover at 41.6% (four-year). Humanities enrolments declined, while priority fields like education rose 10%.

Students face higher debts and fewer options, particularly low SES groups deterred from arts degrees essential for diverse careers.

Stakeholder Voices: Frustration Across the Board

Universities Australia's 2026 report laments 'constrained capacity' for investment, urging MGF acceleration. Go8 calls for research fixes; Labor MPs decry JRG delays; experts like Professor Andrew Norton label it 'anti-intellectual.' Even Independents like David Pocock press for action.

Case Studies: Struggling Institutions

Regional universities face acute misalignments under MGF, while Go8 members balance global competition with domestic shortfalls. For instance, post-pandemic recovery masked deficits, but 2025 saw widespread cuts, echoing broader trends where 66% revenue ties to enrolments.

Constructive Paths Forward

To rebuild trust, prioritize JRG abolition, align CSP funding via ATEC, sustainably grow international education, and boost research to 2.5% GDP. Enhance equity through needs-based allocations and infrastructure via revived capital funds. The 2026-27 Budget offers a pivot point for Accord fulfillment.

• Reform fee structures for equity and viability.
• Stabilize international policies with clear pathways.
• Increase block grants to cover full research costs.
• Invest in staff retention and digital infrastructure.

Looking Ahead: Opportunities Amid Challenges

Despite letdowns, positives like debt relief and enrolment growth signal potential. With ATEC maturing and budget deliberations underway, stakeholders hope for bold steps to secure higher education's future, ensuring Australia remains a global leader in knowledge economies.

Photo by International Student Navigator Australia on Unsplash