Universities will have to demonstrate success across four new performance measures to unlock funding increases from 2020 as the government lifts a two-year freeze on support for undergraduate places.
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Under a new funding scheme to be introduced by the Morrison government, universities will be measured for how well they perform in graduate employment outcomes, student success, student experience and enrolment of Indigenous, disadvantaged and rural students.
Government spending on bachelor-level courses will rise by about $80 million annually from next year, with the increase pegged to the population growth rate of 18 to 64-year-olds.
Education Minister Dan Tehan said higher education in Australia was world class but needed to be "stronger, more sustainable and fit for purpose".
The performance measures, devised for the government by an expert panel of five vice-chancellors, "will ensure there are incentives for performance and transparency", he said.
Under the scheme, graduate outcomes will be measured by their employment rates once they finish their degrees. Student success will be measured by dropout rates among domestic first-year students, while student experience will be based on their satisfaction with teaching quality.
Universities will also be appraised for the participation of students from Indigenous, low socio-economic status, and regional and remote areas.
The scheme is intended to account for differences between universities and the panel recommended that providers be able to outline a "qualitative narrative to help contextualise their performance against the core measures".
Modelling by the expert panel shows the funding increases would be worth an average of $1.88 million for each university in 2020. The report estimates that 86 per cent of available funding under the scheme would be allocated next year.
Under the recommendations, any unallocated funding should still be directed to the university system but conditions would be imposed on underperforming institutions.
The former Labor government introduced a demand-driven funding system, uncapping undergraduate places. The Coalition froze the funding from the start of 2018.
The government did provide relief from the freeze in some cases, dishing out $134 million for regional campuses and funding extra student places at a handful of other universities.
The new performance-based funding scheme aims to increase accountability for spending of public money on national higher education priorities, encourage assessment of teaching quality at universities, and spur improved performance.
The nation's vice-chancellors will be briefed on the new scheme at a meeting with Mr Tehan in Wollongong on Wednesday. The gathering will also discuss the 13 Chinese government-funded Confucius Institutes at Australian universitiesand the threat of cyber attacks.
Performance measures have been met with scepticism from some in the higher education sector, who have warned of the potential for unintended consequences, unfairness and the difficulty of implementing effective indicators.
The report acknowledges that performance measures can be "complex and challenging" and that it is difficult to find an ideal model free of any weaknesses and trade-offs. It notes varied views among the sector on how best to implement the measures. Performance funding is common in the United States and Europe.
Andrew Norton, a higher education expert at the Grattan Institute, has warned against linking funding for student places to performance indicators.
In his submission to the panel, Mr Norton argued "performance funding is unlikely to be helpful in improving student and university performance".
- SMH/The Age
