Stuart Henry (Hasluck, Liberal Party) Share this | Hansard source

I am delighted to rise in the House today to speak in support of this extremely important and visionary legislation for the higher education sector in Australia. By introducing the Higher Education Endowment Fund Bill 2007 and the Higher Education Endowment Fund (Consequential Amendments) Bill 2007, the Howard government is seeking to secure and guarantee a higher level of funding for the higher education university sector well into the future, for the benefit of all Australians seeking to develop their knowledge and effectively compete in an increasingly global labour market.

I would like to review exactly what the Howard government has achieved and has done for this sector since 2004—which somewhat contradicts much of what the previous speaker, the member for Capricornia, has had to say. We have implemented the Our Universities: Backing Australia’s Future reforms, through which the sector will be $11 billion better off over the next decade. We have passed voluntary student unionism legislation, which puts $160 million back into the pockets of students and, further, provides $90 million through the VSU transition fund to support recreational and sporting infrastructure and small businesses on regional campuses. We have provided for 50,000 new places in the higher education sector by 2011 as a result of the Backing Australia’s Future reforms and other initiatives. These places are targeted at areas of skills shortage. They include 605 medical places, 1,036 nursing places, 431 mental health nursing places and 210 clinical psychology places as part of the Council of Australian Governments action plan on mental health and Australia’s health workforce.

We have provided funding for 500 additional engineering places to commence in 2008. These places are part of Skills for the Future. We have provided funding for a new school of dentistry and oral health at Charles Sturt University, allocating 240 new places over five years for the school, along with an up-front capital investment of $58.5 million. We have provided $65.9 million in capital funding for Australian universities for new and continuing campus developments, particularly in regional centres and suburban growth corridors. This includes $12 million in capital funding for a global centre of excellence in transnational crime prevention at the University of Wollongong and capital funding for medical schools and other capital works at Deakin University, $18 million; Monash University, $5 million; the University of Western Sydney, $25 million; and Bond University, $4.5 million. We have provided $125 million for capital funding for the Australian National University, a world leader in medical research, and $8 million for a National Centre of Excellence for Islamic Studies, to be hosted by the University of Melbourne, Griffith University and the University of Western Sydney. We have provided $1.9 billion under Realising our Potential, with funding for higher education and what has now become the $6 billion perpetual Higher Education Endowment Fund, which we are here to speak on today.

There is absolutely no doubt that the establishment of the Higher Education Endowment Fund represents an unprecedented and far-sighted investment by the Howard government in the university sector. The fund further supports a significant commitment by the Howard government for infrastructure for the university sector, including, over the past 11 years, approximately $607 million through the Capital Development Pool and some $1.5 billion for research infrastructure block grants. In addition, we have invested over $459 million in universities through the Major National Research Facilities Program. Further, up to 2010, some $240 million will be spent on the National Collaborative Research Infrastructure Strategy. The endowment fund is in addition to any of these existing programs.

The Higher Education Endowment Fund Bill proposes two separate processes which are required to bring the fund on stream. The first relates to the investment of $6 billion, already increased by the Howard government from budget surpluses from the initial $5 billion in capital to establish the Higher Education Endowment Fund. The second relates to making grants for financial assistance to build state-of-the-art facilities for research and learning.

The Higher Education Endowment Fund (Consequential Amendments) Bill 2007 amends the Future Fund Act 2006 and the Income Tax Assessment Act 1997 to support the introduction of the Higher Education Endowment Fund. These amendments to the Future Fund Act make it clear that the Future Fund Board of Guardians has two specific responsibilities: one is to take on the investment management role for the Higher Education Endowment Fund; the other is that each fund will have a separate investment mandate. The Minister for Finance and Administration will continue to be responsible for the administration of the Future Fund legislation plus the expanded functions of the Future Fund board for the investment of the Higher Education Endowment Fund. These amendments will ensure that investments made by the Future Fund Board of Guardians are determined by the board, not by ministerial direction, with the broad guidelines of the investment mandate. Both this bill and the Higher Education Endowment Fund Bill specify that the responsible ministers cannot direct the Future Fund board to use the assets of the fund to invest in a particular financial asset—for example, in shares in a particular company. It also prevents the responsible ministers from issuing a ministerial direction that has the effect of requiring the board to use the assets of the fund to support a particular business entity, a particular activity or a particular business. Put simply: the Higher Education Endowment Fund is being established to enhance the funds that are available to be invested for the benefit of the university sector.

The Minister for Finance and Administration and the Treasurer will carry the responsibility for the management of the endowment fund capital through the Future Fund board of directors and the Future Fund management agency. The key points are: the board of guardians will be guided in its activities by an investment mandate established by the Treasurer and the minister for finance; and the Higher Education Endowment Fund investment mandate will set out the level of returns expected by the responsible ministers. The endowment fund bill provides an initial amount of $5 billion—that is, it was initially $5 billion—to be credited to the endowment fund, but that has now been increased by a further $1 billion, as announced by the Treasurer on 21 August. Following that announcement, Universities Australia were moved to issue a media release entitled ‘Additional $1 billion will boost benefits from HEEF’. That was a ringing endorsement from Universities Australia.

It is expected that the first round of funding to higher education institutions from the endowment fund will become available in the second half of 2008. The endowment fund will be a true endowment fund, with a requirement in the legislation to maintain the real value of the fund. In addition, the legislation requires that only accumulated returns are made available each year for payment to higher education institutions. The amount that can be made available to higher education institutions each year will be determined by the board of guardians in accordance with the endowment fund investment mandate. The Future Fund is yet another example of the Howard government’s strong economic management and of using the benefits arising from the strong economic management of the Howard government to bank billions of dollars for the future needs of Australians. It is worth noting the support for this initiative from the tertiary education sector. Professor Gerard Sutton, of the Australian Vice-Chancellors Committee, described it as:

... an important step towards ... ensuring Australia is internationally competitive, domestically strong and innovative.

The Vice-Chancellor of the University of Melbourne, Professor Glyn Davis, said the package was very welcome. He said:

It represents not only a new investment in Australia’s public universities but a new philosophy about their regulation.

He also described the package as ‘pretty astonishing’.

I support the minister’s comments that universities need to seriously consider ways of attracting more donations from graduates, corporates and individuals, as Australia is lagging well behind other nations, such as the United States, in philanthropic support. She is right when she says these reforms will allow more world-class universities to emerge in Australia, and we need this to happen. Let us look at the Shanghai Jiao Tong University ranking system, regarded as the most credible of all such ranking systems in the world. It ranks just two Australian universities in its top 100. They are the Australian National University, at 57th, and the University of Melbourne, at 79th. We need more Australian universities to aspire to and to achieve these rankings. The Higher Education Endowment Fund Bill seeks to provide certainty to Australia’s university sector, which is so important to keeping the country at the top of international competitiveness in so many important areas of our economy. Labor’s planned smash-and-grab raid on the Future Fund smacks of the same economic blundering it pursued when last in government, which left this country with a $96 billion debt. It has been the strong economic management of the Howard government that has wiped out that debt, allowing us to take the necessary measures to guarantee economic security into the future.

I would like to address some of the criticisms that have been falsely laid against this legislation. Firstly, how will this affect other higher education funding programs, such as the Capital Development Pool and the National Collaborative Research Infrastructure Strategy? As I mentioned previously, the Higher Education Endowment Fund is in addition to existing programs. Both the Capital Development Pool and the National Collaborative Research Infrastructure Strategy will continue in line with this policy. Will there be enough money available for distribution from the endowment fund each year? The government estimate that about $300 million will be available each year, and it is our intention to treat this fund as a real endowment fund. The capital value will be maintained over time and payments from the endowment fund will only be made from earnings. Naturally, due to the variable nature of the markets and the consequential effects on investments, this may result in funding distributed to the sector varying from year to year. Indeed, I note comments from the Australian Vice-Chancellors Committee President, Professor Gerard Sutton, as reported in an article published on Wednesday, 9 May titled ‘Capital idea gives a warm inner glow’. His view was much less conservative on the potential value of the fund:

... the $5 billion Higher Education Endowment Fund was more than the sector had expected. “You’re talking to a smiling vice-chancellor,” Professor Sutton said.

“This is spectacular for the university sector, there’s no doubt about it.

“In the three areas the AVCC were asking for support, the student assistance we got; the dollars per student in many of the bands increased and in the case of the capital works and research facilities, they more than met what we were asking for with the endowment fund.

“That’s there forever and if they got a 10 per cent return that’s half a billion dollars a year coming into the sector.”

A further article, in the Australian of Wednesday, 22 August, titled ‘Boost for endowment fund’, stated:

The university sector would reap an extra $60 million a year in dividends after the federal Government yesterday added $1 billion to the $5 billion endowment fund it announced in the May budget.

Professor Sutton indicated that, by calculating what returns the universities made from their own investments, the extra $1 billion would return about $100 million, bringing the total return to $600 million. He said:

I think they’ve deliberately budgeted conservatively and I think that’s a responsible thing to do.

The government will not be prescriptive about requiring matching funds. The advisory board will take into consideration whether universities have been able to raise co-funding—for example, from state or territory governments, industry, alumni or members of the public, when providing advice on the best strategic proposals. As for the question of how the endowment fund will manage funding over multiple years, the perpetual nature of the fund encourages longer term, strategic projects, and multiyear projects will be possible, as they are now, for example under the Capital Development Pool.

I now turn to the issue of philanthropic support for Australian universities, which unfortunately does not have a strong tradition at this time. Unlike the United States and, to a lesser extent, the United Kingdom, Australia lags badly in this area. In 2005, only 1.1 per cent of Australian university revenue came from donations and bequests. It was interesting to see an article in the Australian on 10 May headed ‘Funding to spark an outbreak of giving’. It stated:

The new higher education endowment fund is likely to encourage corporate donations to universities, as long as it is properly managed, according to a leading philanthropist.

The article also quoted Pratt Foundation chief executive Sam Lipski as saying:

If the government is creating this lead, it may well set off some interest in the corporate sector.

He warned, though, that it would be a mistake for universities to believe it would be a substitute for their own fundraising activities. Private funding for higher education in the USA is much higher than anywhere else in the world, with many American universities having established considerable endowment funds during the last 20 years.

In reinforcing the importance and value of endowment funds for the higher education university sector, I would like to refer to a very good article by Steven Schwartz, Vice-Chancellor of Macquarie University, published in the Australian Financial Review on 2 July and titled ‘HEEF must heed lesson of Harvard’. The article stated:

Endowment income makes it possible for a university to provide a margin of excellence without having to raise tuition fees or pile more students into classes. A strong endowment protects a university from fluctuations in government funding, while also providing a buffer against any downturns in international student fees.

Endowments are created from initial capital and from gifts of cash, securities and property from individuals, corporations and foundations.

The largest university endowments belong to private American universities. The legendary Harvard University endowment of $US30 billion ($36billion) leads the pack followed by Yale, which has about $US20 billion in its endowment. About 30 per cent of Harvard’s budget comes from endowment earnings.

In addition to Harvard University—and its closest competitor, Yale—Stanford, Texas and Princeton university endowment funds are valued at more than $US10 billion. While the USA does not have a centralised federal government run higher education endowment fund, 24 American states have created government matching fund programs. The average American university in 2003 had an endowment 14 times that of a comparable British university. The only British universities that compare with the best endowed American universities are Oxford and Cambridge. (Quorum formed) Interestingly, the British Labour government is implementing a policy right now to increase philanthropic support to English universities.

Under the Howard government, funding to universities has increased by 26 per cent in real terms since 1996. Let us look at the university populations in Australia over the past 10 years. The total number of students studying in Australian universities has grown significantly, from 604,176 students in 1995 to just under one million—957,176—students in 2005, an increase of 353,000 students, or 58 per cent.

The number of Australian students at universities has risen from 557,989 students in 1995 to 717,681 students in 2005, an increase of 29 per cent. The number of Commonwealth supported places—HECS places—has risen from 403,290 equivalent full-time student load in 1995 to 424,287 in 2007—up by 20,997. Postgraduate student numbers—coursework and research—have significantly increased, from 124,125 students in 1995 to 263,504 students in 2004, an increase of 139,379 students or a massive 112 per cent.

There is no doubt that the Howard government has a vision for the future and has been implementing that vision for the future as far as the university sector is concerned, as these figures quite clearly indicate. This is also clearly demonstrated by ensuring that Australians have the opportunity to have a higher education sector that is second to none, supported by this visionary legislation. I commend the bills to the House.

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