Uncertainty is driving Australian universities up the wall

When Australia’s government took steps to cap international student numbers a couple of years ago, administrative staff in the country’s educational institutions braced for a roller coaster ride of uncertainty. Now, as Canberra gears up to do something similar with domestic university enrolments, staff are strapping themselves in for another white-knuckle ride. 

So far, as with international education, the plunge many feared in domestic student numbers has not eventuated – not at the aggregate level, anyway. But few are reassured.

“People are feeling stressed for a whole variety of reasons,” said a policy specialist at a regional university, who asked not to be named. “A lot of it comes down to uncertainty. There’s an element of, ‘God, I just wish we knew what was happening. Then we could nail things down.’”

Much of the uncertainty surrounds the Australian Tertiary Education Commission (Atec), which is operating in an interim capacity ahead of legislation to establish it formally. The bill passed the House of Representatives in February and has been introduced into the Senate, where amendments are considered likely.

If the legislation passes, Atec will specify roughly how many Australian undergraduates can be enrolled from 2027 through “mission-based compacts” negotiated with each university. A “funding floor”, in place until 2031, will guarantee public universities at least 97.5 per cent of the previous year’s funding for domestic university places.

“Over-enrolments” – the admission of unsubsidised undergraduates – will be confined to an as yet unspecified “buffer” of perhaps 2 or 5 per cent. Up to this buffer, universities will be allowed to pocket the extra students’ tuition fees, but enrolments over the buffer will attract no revenue whatsoever.

Meanwhile, under transitional arrangements applying this year, each university has been assigned a maximum teaching subsidy according to Department of Education estimates of student demand. Universities that significantly undershoot this year’s quotas will be guaranteed the same envelope next year, but without indexation to maintain its real value.

Universities that significantly exceed their quotas may share in some additional funding to subsidise their extra students. But they may find themselves with some completely unfunded students from 2027.

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If all this wasn’t enough for harried administrators, who are also battling the usual chaos of the new academic year, universities are also dealing with a maelstrom of new requirements broadly related to student and staff welfare. Since January they have been obliged to comply with the new National Higher Education Code to Prevent and Respond to Gender-based Violence, whose sector-wide compliance costs have been estimated at A$178 million (£94 million) a year.

Last July, universities inherited the job of administering new government payments for students on compulsory placements. Five months earlier, in February, universities came under the jurisdiction of Australia’s new National Student Ombudsman and were obliged to consider granting permanent employment to casual staff who had performed six months of reasonably regular work. Universities were also forced to adopt highly prescriptive student support policies from April 2024, and to manage “psychosocial” risks to their staff from April 2023.

Further changes now being considered to minimum regulatory standards would require institutions to demonstrate efforts to curtail racism and boost support for students with disabilities, among other things. They will also be pressured to systematically grant advanced standing to graduates of public vocational education colleges, permitting them to skip elements of their degree programme.

Meanwhile, the higher education regulator Teqsa regularly contacts universities to remind them of their obligations to address contract cheating and stamp down on antisemitism, among other things. And while the federal government has funded additional tranches of university places, some have come with strings attached. For instance, 20,000 extra places commencing in 2023 and 2024 were reserved for disadvantaged students, while another 4,000 starting between 2024 and 2027 were confined to STEM study.

“There’s a confluence of different policy, regulatory and financing things all going on at once,” said John Byron, principal policy officer at Queensland University of Technology. “Whether it’s student safety, prac payments, the ombudsman, contract cheating – any number of things you could name. They’re all things that need to be done. Everyone’s got good intentions here. But they’re kind of all hitting people at the same time.”

Byron likened the current situation to a period several years ago when the sector was struck by a barrage of national security-related regulatory interventions and regimes from at least five federal government departments, the Parliamentary Joint Committee on Intelligence and Security, the Australian Security Intelligence Organisation and the Australian Research Council. In short order, universities were subjected to a multitude of new requirements around foreign influence and interference, agreements with foreign institutions, management of critical infrastructure, defence trade controls and sanctions of foreign governments, among other things.

All this created a nightmare for university administrators, as different arms of government imposed sometimes overlapping requirements on different sections of university operations. “Now the same thing’s happening in the higher education policy reform arena,” Byron said. “Different bits of government have been doing very worthy things, but without much visibility on what other bits of government are doing.”

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With the Atec establishment legislation still before parliament, education minister Jason Clare says another bill – to be introduced in the next few months – will empower the commission to build a system “that’s not just bigger and better” but fairer too.

“We have done this already for Indigenous students,” Clare told the Universities Australia conference. “Now we are doing it for all students from poor families and the bush. If you get the marks, or you’ve got the skills, you will get a spot.”

The approach would revive the demand-driven funding championed by former higher education reviewer Denise Bradley, but only for disadvantaged, Indigenous and regional students. Bradley’s system succeeded in increasing university enrolments “but the percentage of students that came from poorer families didn’t really move at all”, Clare explained.

His plan also involves an adaptation of the “needs-based funding” championed in schools by former UNSW Sydney chancellor David Gonski. “It means extra academic and other support services to help students make it through university,” Clare explained.

“The more students a university has that meet the criteria, the more funding [it] will receive. The more students that are at a regional campus, the more funding that university will receive as well.”

The “demand-driven for equity” promise has baffled even the most seasoned experts, however. “We’ve got no idea how it’s going to work,” said Andrew Norton, professor of higher education policy at Monash University.

“We’re being told caps, but we’re being told demand-driven for regional and low socio-economic students,” said the regional university policy specialist. “Is that on top of the cap? Is that inside the cap? Is it a zero-sum pool? We don’t know. We don’t know what our cap will be and what we need to do to get the cap raised or avoid having it lowered.

“Some elements of the funding model are supposed to come in this year and some elements are supposed to come in next year. Right now, from what I can tell, a finance person couldn’t tell somebody at a faculty with any certainty how many students they’re likely to see next year. I could see it affecting people down to the lecturer in front of the whiteboard, who may not know whether there’s sufficient places or funding or what strategic decisions the institution might make.”

Frontline university staff simply want clarity, Byron said. “People on the ground are saying, ‘I just want to know what I can do. I don’t want to break the rules. I don’t even want to bend the rules. I want to drive the road in my lane. Can you show me where my lane is?’”

Extending the metaphor, Byron likened the situation to a half-built new road, with “Caution: unmarked lanes” signs. “That’s the situation they’re in,” he said. “It’s not all asphalt yet. Some of it’s gravel; some of it’s down to bare dirt. We’re making this up as we go, building the plane while we’re flying.”

Some of the uncertainty relates to transitional arrangements for supporting “equity” students. This year, the government has replaced the main equity scheme – the 16-year-old Higher Education Participation and Partnerships Programme – with introductory needs-based funding arrangements and a A$44 million Outreach Funding Programme.

The Education Department has issued detailed guidance on both these schemes, but questions remain on exactly what kinds of activities can be planned. These sorts of details matter because outreach activities “need a bit of lead time”, Byron explains.

Space for planning is particularly important in ensuring that any new courses are consistent with the yet-to-be-decided funding rules. “Those processes take time,” Byron says. “New courses go through the academic board at every university. It doesn’t happen in a week, and it doesn’t happen without a great deal of scrutiny, as you would hope. Having a transitional year for student financing is like building a bridge without knowing what the other shore looks like.”

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However, one of the main fears of policy experts – that the uncertainty created by the coming changes would force universities into more conservative admissions practices, undermining the policy intent of higher participation – has not transpired so far.

Clare says more Australians are starting university degrees than ever before, with offers of places up 2.5 per cent this year – according to preliminary data from the five state-based tertiary admission centres – on the back of a 5 per cent increase in offers in 2025 and a 4 per cent rise in commencements in 2024.

Norton says all but one of Australia’s 37 publicly funded universities received higher funding ceilings for teaching domestic students this year, although only six attracted sufficiently large increases to offset inflation. “This year is not as bad as I thought,” he said. “Only a few unis have been required to reduce the number of commencing full-time equivalent [students] and most…have been allowed to take more than they took in 2025.”

Norton had been concerned that the looming cap on over-enrolments would reduce the availability of university places just as demand from school-leavers spikes amid a demographic bulge and a faltering economy. “Significantly” over-enrolled universities might cut their admissions to bring themselves back within the government’s targets “two or three years down the track”.

There are signs that this happened, but not enough to drastically constrain the supply of places. The Australian Financial Review reported that the University of Sydney has this year increased its enrolments by 5 per cent, and by 25 per cent in the lucrative field of law, despite being warned to prepare for the enforcement of limits on domestic student numbers.

Sydney said its domestic undergraduate enrolments were about 4 per cent higher than last year owing to a “range of factors” including a “significant change” in student behaviour.

“We’re serious about working with the government to meet our targets and manage growth, and we made significantly fewer offers and paused enrolments for many courses this year,” a spokeswoman said. “However, that’s coincided with a 10 per cent increase in the proportion of students accepting offers, and [they are] doing so earlier than in previous years.”

She said Sydney’s “long-running” guaranteed entry scheme had also been a contributing factor. Under the scheme, students automatically gain entry to undergraduate courses if their Australian Tertiary Admissions Rank meets specified benchmarks, such as 85 for psychology or 99.5 for law. “We won’t be able to offer the same certainty to commencing students from 2027, given the changed circumstances,” Sydney’s spokeswoman said.

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Clare said the managed growth model was designed to tackle the current “Hunger Games” approach, whereby “universities are encouraged to be the same size and eat each other alive for students”. Atec will help build a system featuring “universities of different sizes who do different things, more like a constellation than the cut-and-paste approach that we have today”, he told the Universities Australia conference.

But Norton said the looming onset of managed growth had saddled universities with much the same problem experienced by airlines that “overbook to ensure a full flight” and then find themselves with more passengers than they can carry.

“This…goes to the inherent difficulties of managing to a precise number,” Norton said. “You always put out more offers than you want as enrolments because you know that not everyone accepts the offer. But if the acceptance rates are higher than you thought they would be, you accidentally end up with more students than you planned.

“This is happening at even the top unis that probably have more stable year-to-year patterns of behaviour. It’s even harder further down the demand hierarchy.”

Another danger, Norton said, is that the proposed 97.5 per cent funding floor makes it “financially safer” to be below quota than above it. “The incentive may be to be more conservative in offers than you would have been historically because the undershoot is better than the overshoot – at least in the short term. The problem…is you might not get what you want in a subsequent year because you’ve failed to use all your load the previous year.

In most cases, universities want to give students whatever opportunities they can, he continued. “Even if policy is a bit hostile to them, I think they’ll continue to do the best they can. But…if you’re going to get zero dollars above 2 per cent or 5 per cent or whatever it ends up being, you do want to keep the number of completely unfunded students as low as possible.”

For now, Norton said, university administrators are probably more worried about their capacity to accommodate students than about the policy details around funding. Years of experience have shown that tuition fees alone can cover the costs of educating extra students, on top of the number required to run a class. “Once you’re taking more students into courses and buildings that already exist, you can probably manage that on the student contribution alone.”

But with universities soon being barred from accepting fees from undergraduates who don’t attract Commonwealth Supported Places funding outside the small “over-enrolment” buffer, and with firm caps looming on “non-equity” commencements, universities are set to lose flexibility just as the government expects them to increase their offerings.

“A serious risk is that there simply won’t be the capacity in the system when [students] want to attend,” Norton said. “[The government] wants to reduce competition. But that also reduces student choice, because universities can no longer respond to demand as it’s emerging.”