Expand allCollapse all Media release Demand driven university system gets a mixed report card The 'demand driven higher education system' drove a surge in domestic undergraduate enrolments between 2010 and 2017. This gave opportunities to a broader range of students, but with mixed success. Tens of thousands graduated and went on to well-paying jobs but many also dropped out. "The chance of a university education has been transformative for many, setting them on a path to better economic prospects. But it is also costly — to students as well as taxpayers," said Productivity Commission Chair Michael Brennan. The Productivity Commission report The demand driven university system: a mixed report card for the first time sheds light on the 'additional' students who went to university as a result of the demand driven system, and tracks their academic and employment outcomes. More people from low socioeconomic backgrounds attended university following the expansion in the system — one of the policy's main aims. But there was little improvement in participation for regional or remote and Indigenous young people, and significant participation gaps remain for all of these groups. And not all of the additional students succeeded: 21 per cent had dropped out of university by age 23 years, compared with 12 per cent for other students. "But that isn't to say that a capped funding system is more effective," said Michael Brennan. "It can be too restrictive, discourage innovation and opportunity, and some people fail in that system too." The additional students identified often entered university with poorer literacy and numeracy and lower ATAR scores on average than other students. Literacy and numeracy skills of Australian school students are dropping across the board, with the average student falling behind a whole school year in maths since 2003. Poor literacy and numeracy affects those from disadvantaged backgrounds the most, making them far less likely to go on to university and succeed academically. "Our report doesn’t make specific policy recommendations, but it certainly points to areas where improvement is needed, regardless of whether or not funding is demand driven. Our school system needs to prepare larger numbers of young people for university, and many university students need greater academic support to succeed," said Chair Michael Brennan. In its 2017 report Shifting the Dial, the Productivity Commission found that university incentives were not necessarily aligned with student needs, with teaching revenue being used to cross-subsidise research. "The university sector needs to be motivated by informed choice much more than enrolling large numbers of students, bringing a stronger focus on student outcomes, quality teaching and support," said Chair Michael Brennan. "Government policy and university business models need to adapt to the ongoing shift to a mass participation model" said Michael Brennan. The demand driven university system: a mixed report card can be found at www.pc.gov.au. Key points University education can be transformative. It is also costly in terms of forgone earnings, student debt and Commonwealth outlays, so it is important that students, taxpayers and the broader community benefit from the investment. The ‘demand driven system’ in place between 2010 and 2017 was intended to increase domestic student numbers and give under-represented groups greater access. The results were mixed. It was certainly effective in increasing numbers: the share of young people that attended university by age 22 years increased from 53 per cent in 2010 to an estimated 60 per cent in 2016, based on data from the Longitudinal Surveys of Australian Youth. Multivariate regression analysis shows that the 'additional students' — those whose attendance can be ascribed to the expansion of the system — were drawn from many backgrounds. However, compared with other students, they typically had lower literacy and numeracy and a lower Australian Tertiary Admission Rank (most had an ATAR less than 70). Many of the additional students succeeded. About half of the additional students graduated by age 23 years (with many still studying). About half of those graduates entered managerial or professional occupations, outcomes that are similar to those of other graduates. However, people that enter university with lower literacy and numeracy and a lower ATAR drop out at higher rates. By age 23 years, 21 per cent of the additional students had left university without receiving a qualification compared with 12 per cent of other students. University participation increased within some under-represented 'equity groups', but not others. School students from a low socioeconomic background and 'first in family' students were more likely to participate in higher education following the expansion in university places. However, the participation 'gaps' (compared to those not in the equity group) remain for Indigenous people and for people from regional or remote areas, and may have widened. Despite the expansion, the level of participation among all these groups remains far lower than for people who do not come from disadvantaged backgrounds — a reflection of poorer average school performance and a range of cultural and environmental factors. In the latter respect, an equity group student with a given level of academic ability is still significantly less likely to attend university than their non-equity equivalents. Overall, the demand driven system succeeded in increasing the number of students and made progress in improving equity of access. However, many are entering university ill-prepared and struggling academically. This study suggests some areas for further policy consideration: The school system has arguably not adapted to the role needed of it to prepare more young people to succeed at university, or more broadly to meet the growing demand in the Australian economy for complex and adaptable skills. Average literacy and numeracy of school children needs to rise to fill this role, reversing the sharp falls since 2003. Children growing up in regional or remote areas with the same academic ability as their metropolitan peers continue to be much less likely to attend university. The growing risk of students dropping out of university requires attention. On average, the additional students need greater academic support to succeed. While universities had strong incentives to expand student numbers, the incentives for remedial support are weak. University will not be the best option for many. Viable alternatives in employment and vocational education and training will ensure more young people succeed.