Australia: New scheme proposes performance-based funding for universities

SOURCE: Vasily Koloda/Unsplash
To receive extra funding, Australia's universities will be measured across four performance metrics.

By Clara Chooi 

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Universities in Australia must perform well across four performance metrics to receive their share of education funding increases from 2020, in a new scheme being considered by the Morrison government.

Under the scheme, the government will pump an extra AU$80 million into Bachelor-level courses to boost student outcomes, effectively lifting a freeze on university funding instituted in 2018.

Funding will also increase annually from next year, taking into account the annual growth rate of the country’s population of 18 to 64-year-olds. This cumulative approach will be tied to a limit, however, with funding to grow only until it reaches 7.5 percent of each university’s basic grant amount.

Beyond this point, the performance-based funding at stake for a university will remain at 7.5 percent.


To receive the funds, the university must demonstrate success across the four measures, which include graduate employment outcomes, student success, student experience and participation rates of indigenous and low-socioeconomic status students.

These were among the 18 recommendations made by an expert panel led by University of Wollongong vice-chancellor Paul Wellings.

Education Minister Dan Tehan, who released the panel’s report on Wednesday, said the model would provide an incentive for universities to boost student outcomes.

“This report shows that while we have a world-class higher education system, it needs to be stronger, more sustainable and fit for purpose,” Tehan was quoted saying in SBS.

The report stipulates that student success will be measured by dropouts among first-year domestic students while graduate outcomes will look at the overall employment rate of graduates. Student experience, on the other hand, will be based on student satisfaction with teaching quality at the universities.

Universities will also be measured on “equity group participation”, which looks at its admission of students from Indigenous groups, lower-income households and remote areas, furthering a wider government equity policy.


The report added that education providers would be given the opportunity to submit a qualitative narrative to “help contextualise their performance against the core measures”.

“Further contextualised measure thresholds will recognise the varied missions of these universities and their students’ characteristics,” it said.

The panel also outlined the objectives of introducing a performance-based funding model, which it said would help create accountability for the spending of public money on higher education, as well as offer financial incentives to improve specific areas of university performance.

The latter objective is illustrated under the fifth recommendation, in which the panel said: “Unallocated funding (which should be retained in the higher education sector) should be provided to universities under conditions negotiated between the Department of Education and the university.

This effectively means that poor-performing institutions would still stand to receive funding, under conditional circumstances. These conditions could include additional reporting requirements or transparency measures, or project-based initiatives.

Tehan said this condition does not negate the objectives of the performance-based funding model, Times Higher Education reported.

“It enables government to say to that university, we would like you to lift your performance in this area,” the minister told the portal.

“The universities give up a tiny bit of autonomy where they’re not performing as well as they otherwise would be.”

According to Guardian Australia, Tehan also said the “uniquely Australian” model was “not a carrot and stick” approach because top performers would be rewarded while those that fail would also be incentivised to improve their performance in specific areas.


Modelling by the panel using indicative data showed that in 2020, 16 universities would receive over 90 percent of their funding, 31 would receive more than 80 percent and the worst-performing university would still receive 75 percent.

The panel also estimated that around 86 percent of funding available under the scheme will be allocated to universities in 2020.

Australia’s universities have reserved comment for now, only saying they would examine the proposal and provide feedback to the government as it finalises the plan. Tehan, who reportedly called the framework “an excellent one”, is expected to sign off on the scheme by month-end.

Universities Australia Chief Executive Catriona Jackson said universities would work with the government on the proposal.

“We are confident that neither government nor universities would want to see institutions that educate some of the nation’s most disadvantaged students lose out financially,” she said in a statement.

“We need to ensure that the proposed system can adequately meet student demand, plan for future workforce needs, and serve diverse local communities.”

“We are also acutely aware that an increasing number of 18 year-olds deserve the same chance at university that their siblings enjoyed. That’s especially true for universities who educate more regional, mature-age, part-time, Indigenous and disadvantaged students.”