Prosperity summit’s sidelining of Australia’s universities is baffling

For three days Australia’s formidable Treasury minister Jim Chalmers chaired a national policy summit last week to resolve the question of how the nation’s future prosperity is to be secured. The chiefs from all sectors of the economy, ranging from finance, tech, mining and small business to union leaders, construction and central banking, have a seat at the top table. In an astonishing move, the nation’s universities have been left outside, chipping in proposals from the sidelines of one of 40 pre-summit round tables.

Responding to the nation’s productivity puzzle is now urgent. Business and government spending on R&D presently sits at 1.7 per cent of GDP against an OECD “rich country” average of almost 3 per cent; some are spending as much as 6.3 per cent of GDP on R&D.

Many economists have linked this spend to sluggish labour productivity growth which, after rising to 2.1 per cent in the early 2000s, slumped to 0.9 per cent in the latter half of the decade. It improved slightly to 1.2 per cent between 2010 and 2019.

Australia is not alone. Developed economies across the world universally are facing productivity headwinds. The most obvious response among many has been to focus on the future knowledge economy, in part by developing universities more effectively.

The enthusiasm of the Canberra summit to embrace tricky issues is offset by the imperative to foster a consensus on the way forward. But rejigging taxes, disentangling regulation and a bonfire on interstate qualification rules will only streamline the economy; these changes cannot, in themselves, grow the value-added base of what the economy does.

Downgrading universities’ contribution at the summit means that three opportunities have been missed.

The first is to grow the human capital capabilities of future Australians. Expansion of the tertiary education sector is central to that task. Significant parts of the 2024 Australian Universities Accord (the Labor government’s once-in-a-generation bid to reset the tertiary education landscape) are now being implemented. A target has been set for 80 per cent of young people to hold tertiary qualifications within 25 years.

The rub is that younger cohorts have a declining inclination to want to go to university. It is estimated that the numbers of new annual graduates have shrunk by a tenth in the past decade.

Many universities are therefore broadening their appeal. Dual-sector ones, covering vocational and higher education qualifications, will be vital in ensuring greater harmonisation and interoperability, as Swinburne University’s vice-chancellor Pascale Quester has argued. Greater reliance on university-enabling programmes, helping future students bridge between school and university and opening alternative entry pathways, will be another important stepping stone.

Meanwhile, the contrasting upgrade to university systems in rising economies is unmistakable. Take India’s National Educational Policy, launched in 2020, which has tasked universities to overcome the low value-added character of its huge labour market. The country aims rapidly to grow new comprehensive and specialist universities alongside PhD-granting institutions. Meanwhile, excepting the merger of two South Australian universities, no new Australian ones of any kind are foreseen.

The second squandered chance is even more critical – namely, harnessing universities’ research to reform structural weaknesses in the economy. Today, the Harvard Growth Lab’s Atlas of Economic Complexity ranks Australia 105th out of 135 countries. Australia is simply too reliant on a small handful of non-complex industrial sectors – producing “rocks and crops”, as the saying goes.

Long term, this puts Australia on the doomed path of Argentina, where the tiniest, feeblest manufacturing sector emerged post-war. This led to very narrow industrial and trade concentration, and a high exposure to global resource price volatility.

Too many Australian businesses are characterised by sluggish competition and incrementalist survival strategies. Disruptive influences have been kept at bay and scarcely any new players have been able to break into highly protected sectors such as banking and telecoms. Although Australian universities have been improving their links with industry, the results in terms of new products and services have been minuscule. High-tech, high-value-added products (as defined by the World Bank) make up only 2 per cent of Australian exports as against 7 per cent across OECD countries.

Pushing public bodies into a space that incubates and fosters university-led innovation, which is then quickly commercialised, is the priority. Roy Green, an innovation authority at the University of Technology Sydney, points out that over 100 budgets and 40 institutions sit between national R&D programmes and the government’s own Future Made in Australia strategy.

Third, without a serious focus on university-led innovation and enterprise, the event has headed towards a fest of self-indulgence from unions and businesses scrambling to shore up protected interests. The most eye-catching has been a proposal to adopt a national four-day working week for full pay, reinforcing suspicions that some summiteers see the purpose as the distribution (rather than generation) of prosperity.

The summit should be an opportunity to push back on the country’s poor regard for education as compared with practical, manual skills. This distinctive feature of Australia’s economy is rarely debated, with most university vice-chancellors choosing to accept an overly modest and highly instrumentalised view of the worth of their sector.

The country’s Group of Eight research-intensive universities have at least argued for a fresh national research strategy, with concentrated funding devoted to a limited number of centres of excellence. Linking this with improved access of investment capital is buried in their submission, however, and therefore unlikely to gain the attention it deserves.

The summit failed to avail itself of the vision and evidence that many more skilled, resourceful graduates combined with diversified industrial sectors can become the foundation of future productivity and prosperity. These challenges are classic economic supply side matters, and it is disappointing to see them sidelined.

Worse still, Australia’s university sector has been under pressure of late amid allegations that it has squandered its social licence, punctuated by countless rows over wage theft, poor-quality degrees, exploitation of international students and, of course, the salaries of top executives. Sadly, the summit is a missed chance to answer the productivity puzzle and thus help repair that damage.

Shamit Saggar is professor of public policy and director of the Australian Centre for Student Equity and Success at Curtin University. He was a former senior official in Tony Blair’s UK government.