Reforms in Education in Australia

Question: Discuss about the Reforms in Education in Australia. Answer: Introduction The report analyses an article stating the policies and reforms undertaken by Australian government to improve educational system in Australia in 2014-15 budget. As per 2012 data of OECD, overall performance of Australia among OECD countries are good, although this country lacks behind due to poor performance in mathematics and science (Oecd.org 2015). Academic performance among the rural or aboriginal and Torres Strait Islanderpopulation is not satisfactory. In order to mitigate several challenges in the education system, reform was inevitable in this country. The article highlights proposed reforms in 2014-15 budget of Australia. The aim of the reform is to promote higher secondary and tertiary education among students and to bring quality in the education system. EconomicAnalysis Proposed reform highlighted in this article is about deregulation the provision of places in higher secondary. With increase in population, demand for education is increasing as education is a process of human capital formation. Government has decided to deregulate this market to increase competition and quality of this sector. Demand driven model has been undertaken to determine level of educational attainment and user pay (Aph.gov.au 2014). This initiative reduces government contribution in this sector and allows private organisation in the higher education sector. The objective of reduction in government support is to remove limit of borrowing for higher education. Without ant limit, student can pursue any desirable level of education at any cost both in domestic and foreign institutions. However, there is another implication. Being a demand driven model, student tuition fees are likely to rise in higher education. As the private educational institutions are allowed to operate in the market, they are likely to invest more to improve quality of education (Bowen and Sosa 2014). Figure 1: Demand driven model (Source: created by author) Initial fees at each level of education are determined by market demand and supply in a free market. As demand for education rises among the students to get more job opportunity in Australian market, tuition fees are likely to rise as shown in figure 1. In the demand driven model, supply is determined by the change in demand. In figure 1, as demand shifts from D1 to D2 for a given level of supply, places in the institutions to enrol students increases with the increase in tuition fees. The students who are willing to achieve higher education are ready to pay higher fees as there is greater access of credit for education. However, as argued by Psacharopoulos (2014), hike in tuition fees discourages some students to avail higher and tertiary education. Chances of availing higher education among the low socio economic background student might decrease. However, with the increase in fees, the infrastructure is likely to improve to enhance quality of higher secondary and tertiary educatio n. Therefore, proper infrastructure, innovation in teaching method can enhance interest in mathematics and science, which further can help to increase productivity and innovation in different sectors of the economy (Dahal and Nguyen 2014). Therefore, although removing government support may increase tuition fees, level of enrolment in tertiary and higher education is expected to increase. The reform can be viewed from market perspective. Reduction in government subsidy allows private institutions in the market by greater number. Therefore, greater participation of the private player in the market increases efficiency to make the market competitive (Steiner-Khamsi 2016). Competition in the market keeps the fees of students during admission at competitive level. Private institutions charge fees as their own. Increase in number of institutions may keep fees at the competitive level. Figure 2: Comparison of price between monopoly and competitive market (Source: created by author) As shown in figure 2, when private firm has market power, it can charge higher price at a lesser quantity. Pm is the monopoly price and Pc is the competitive price. However, competitive price provides greater quantity to the consumers at a lower price. Therefore, fees for admission and other tuition fees may be at a competitive level in order to draw more students in the private institutions. Recommendation Although allowing private institution in a free market at greater number increases efficiency in the education system there is a chance of exploitation. Private firms can make collusion among them to change a uniform price to increase profit. Private firms desperately can increase tuition fees, which may decrease rate of enrolment of students in domestic institution. Moreover, higher fees excludes low-income group to avail higher education. Hence, government intervention in education system is required to restrict monopoly power of the private organisations. Government may impose a price ceiling to restrict significantly higher fees. No firms are allowed to raise fees above the price ceiling. Upper cap of fees can be set above equilibrium market fees. Moreover, the fees can be set at the international level to make the Australian educational system competitive at the international level. Education fees and quality at global level helps to attract foreign student in the market and the foreign talent. Conclusion The report focuses on the educational system reform in Australian economy. This paper focuses on the reform proposed in the 2014-15 budget by Australian government. The reform policy states highlights to remove government cap on availing finance for higher education and government support. It proposes to allow private organisations in student enrolment in higher education. The report discusses both positive and negative side of this policy. On one hand, increase in private institutions increases scope of enrolment of students in higher education and can keep student fees at a competitive level. However, higher fees may restrict low-income group to attain higher level of education. It has been recommended therefore, that setting an upper cap for fees or keeping fees at the international level can make education system globally competitive. References Aph.gov.au. 2014.Reform of the higher education demand driven system (revised) Parliament of Australia. Available at: https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/rp/budgetreview201415/higheredu#_ftn1 [Accessed 13 Apr. 2017]. Bowen, W.G. and Sosa, J.A., 2014.Prospects for faculty in the arts and sciences: A study of factors affecting demand and supply, 1987 to 2012. Princeton University Press. Dahal, M. and Nguyen, Q., 2014. Private non-state sector engagement in the provision of educational services at the primary and secondary levels in South Asia: an analytical review of its role in school enrollment and student achievement. Oecd.org. 2015.Education Policy Outlook Snapshot: Australia - OECD. Available at: https://www.oecd.org/australia/highlightsaustralia.htm [Accessed 13 Apr. 2017]. Psacharopoulos, G. ed., 2014.Economics of education: Research and studies. Elsevier. Steiner-Khamsi, G., 2016. Standards are good (for) business: standardised comparison and the private sector in education.Globalisation, Societies and Education,14(2), pp.161-182.