Chapter 2: The external context for our strategic planning

  1. International competition for staff and students
  2. Responding to the public policy context

Core to the statement of purpose is an awareness that the University operates as part of a complex higher education sector in both Australia and the wider world. Of course a comprehensive consideration of the changing external context in which we operate is outside the scope of this Green Paper, but two need particular emphasis. These are an increasing international competition for the most able staff and students, and an increasing range of public policy aspirations for the university sector in Australia. The key to meeting both these contextual challenges may well be founded in an affirmation of the values embedded in the strategic purpose outlined in Chapter 1.

1. International competition for staff and students

In recent decades both academic staff and students have become more internationally mobile. Thus, although it is a categorisation with which many are uncomfortable, education is now one of Australia’s largest ‘export industries’ (hovering around third or fourth largest). Higher education is an integral part of this industry. Indeed international students now constitute around a fifth of the entire student population of Australian universities, although there are some universities where the proportion is much higher. Significant inflows of international students have enhanced the cultural diversity of the university student population and thereby enriched the student experience.

Australia, however, is only one participant, and by no means the largest, in an international market for good staff and promising students. Competition for the best students and staff is dramatically increasing and the University must be able to respond to these pressures.

Increasing competition for international students
Greater international competition for students is likely to affect our ability to achieve our strategic purpose. By some estimates the flows of students (fee paying, exchange and study abroad) around the international higher education system is of the order of three million a year, and while the United States still commands the highest share of this market, with around 21 percent of international students, Australia has emerged as a major player in this market, moving from around a 4 percent share in 2001 to above 7 percent by 2008. In total there are almost 189,000 international students enrolled onshore in Australian universities (representing around 20 percent of all enrolments). The University of Sydney was slow to enter this market but has made substantial gains over the last five years (see Appendix 5). There are now around 10,500 international students here, constituting around 22 percent of our total enrolments.

The arrival of these international students has brought many advantages to Australian universities, not least our own. It has enriched our campus life. It has given us an impressive network of alumni and friends throughout the world. It has also, given that the fees international students pay are not capped at a level that fails to reflect the real cost of their education, been of great financial benefit to the Australian university system and masked shortfalls in public funding. These benefits have led many Australian universities to pursue a policy of almost unconsidered expansion of international student numbers.

This rapid increase in international student numbers has not, however, been without its challenges. Two merit particular attention. First, international student enrolments in Australian courses have been remarkably uneven. This places a real planning pressure on universities by encouraging growth in a handful of fields that are particularly attractive to international students, whether or not a given university would otherwise choose to grow those fields on academic grounds. The greatest demand has been in the area of commerce and business degrees where in many universities, including ours, international students constitute half, sometimes more, of the student population. Engineering has also been popular, as have been degrees in design, architecture, veterinary science, and law. Other areas have been less popular and this has undermined the funding base for key science, humanities and social science disciplines that are less likely to attract international students. Thus some have argued that international enrolments have a distorting effect on the internal disciplinary economy of Australian universities.

Second, an increased reliance on international student fee income has arguably left the Australian university sector excessively vulnerable to the increasing competition for high-quality international students. It is true that the international student market has been remarkably resilient in the face of the global financial crisis. The market continues to grow despite the fragile nature of the international economy. Australia’s reputation for high quality, value for money education and a safe and secure environment is serving the national sector well. That our language of instruction is English is a further factor in our favour. Australian universities, however, cannot afford to be complacent. There are a number of potential risks. A worsening of the global financial situation may have long-term effects on the international student mobility market. Reports, fair or unfair, of prejudice against or violence towards international students could undermine Australia’s reputation as a safe haven for foreign students. Perhaps the most significant long-term threat is increasing competition in this market, where Australia, if it were to fall behind its competitors in the provision of outstanding research training, excellent teaching, good support services or accommodation, might face a decline in its market share.

The signs of increasing competition are everywhere. The United States, with a high proportion of the world’s leading universities remains the strongest player in this system. Over the last decade, however, leading UK universities, especially those in the Russell group, have begun to operate very effectively in the international market: they have been particularly successful in Asia, currently the greatest source of international students for Australia. There is also growing competition within Asia itself. Hong Kong and Singapore have both been investing heavily in higher education, to enhance research performance, teaching quality and reputation, with a view to establishing their universities as major regional hubs for students from around Asia. The serious decline in the Japanese birth rate over the last two decades is imperilling the sustainability of Japanese universities. As a result many of the leading Japanese universities are establishing special faculties where the language of instruction is in English to attract Chinese and Korean students to study in Japan rather than in the United States, United Kingdom, Australia or New Zealand. Some of these universities, for example Nagoya, have enrolments of over 1000 in these faculties. Another factor complicating the international market is a gradual erosion of the distinction between source and supply countries. China has traditionally been a major source of international students and this trend is likely to continue for at least the next decade. But a number of the most prestigious Chinese universities, particularly the members of the so-called ‘China 9’ such as Peking and Tsinghua, are now accepting significant numbers of international students (around 2000 each per year). The international student market is now much more complex and competitive than it was 10 years ago, raising serious issues for the future viability of the Australian share of this market.

In light of this increased competition, the University has been working hard to ensure that it is an attractive destination for international students. In contrast to the mass market approach that some Australian universities are adopting, we are keen to position ourselves as a high-quality destination for the most able students from the region and the world. We have been looking at ways in which we can deliver on this promise in the support that we offer them. We have recently undertaken a review of the academic and other support services that we provide for international students, and are working on issues concerning their accommodation needs. We have significantly increased the numbers of international student scholarships that we offer and are looking to do so further. We are capping international student enrolments in some faculties, and working to increase international student participation in others. We are also seeking to diversify the countries of origin of our international student cohort. It is implausible that our overall numbers of international students should grow. The focus of the next period of the University’s life must be on developing the quality, rather than the size, of this cohort. Only in that way can we hope to meet the increased competition for international students in a way that is both sustainable and consistent with our strategic purpose. This approach is undoubtedly more costly in the short term, but we believe that the mass market approach is ultimately unsustainable.

Increasing international competition for staff
Current projections of staffing needs, the age profile of the academic workforce, and the pipeline of PhD students being produced, point to a major staffing crisis in the next decade. Large numbers of academic staff will retire in the next decade, and the number of PhD students being produced is at present inadequate to replace them. This is an international phenomenon. At precisely the moment when there are fewer academic staff available, both Australian and overseas universities will be searching to fill large numbers of vacancies. Thus international competition for talent is likely to be very intense in the next 10 to 20 years unless we can significantly increase the number of PhD students graduating. The federal government has established a research labour force advisory group to explore policy options in precisely this area. The result of these labour market pressures is likely to be higher salaries for the best staff (creating significant upward pressure on university salary bills), and a demand from such staff for better research infrastructure and lower teaching loads.

Again we have a range of projects devoted to improving our ability to attract high-quality overseas staff. In particular, some parts of the University are experimenting with joint appointments with overseas institutions, particularly taking advantage of the seasonal differences between northern and southern hemisphere calendars. A current Work Slate project is developing guidelines to facilitate such appointments.

More generally, however, our best approach to flourishing in an increasingly competitive global market for staff and students is to position ourselves as a truly ‘international’ university. There is no other way effectively to serve the needs of both our domestic and international staff and students. This has several components. First, we need to consolidate our reputation as an important partner in international higher education and research, particularly in our region. Our list of research and teaching collaborations with overseas universities is already very impressive (see Appendix 6), but we will have to build on this record of achievement over the next decade. To ensure that the partnerships that we have are deep and long-term, we must encourage, and perhaps invest in, exchanges of staff and research students (for periods of a month to a year). We must provide short-term accommodation for international staff and research students coming to the University under these collaboration arrangements. Similarly, we need to send far more students overseas on exchange at all stages of their education to broaden their horizons than we currently do. While we have over 10,000 international students coming to campus each year, at present we only send about 400 a year overseas on exchange. This is high by Australian standards but small by comparison with international benchmarks (particularly with leading US universities) and we have a Work Slate project on ways to increase participation in exchanges. A critical issue will be inculcating an international ethos among local Australian students and encouraging them to undertake a semester or year abroad as an integral part of their educational experience. This will involve further investment in financial support to encourage student participation in exchange partnerships.

Second, we need to become an attractive environment for high calibre international researchers in the ways outlined in Chapter 6; not least by the strategies described there for expanding the range of areas in which we can claim to be operating at the highest level internationally.

Third, we need to consolidate our reputation as an employer of choice. Workforce diversity and full inclusiveness in terms of gender, age, disability, economic status, and culture will need to continue and expand. For example, we have Work Slate projects around issues such as gender equity and creating family friendly work policies, the recommendations of which will be implemented during the planning period. But we need to work creatively, and on an ongoing basis, to ensure that the University is an environment in which staff are appropriately supported in both their work and professional development.

In short, we will only survive the increasing competition for international staff and students if we are able to achieve our strategic purpose; that is, if we are able to develop our reputation as a place committed to academic excellence and to making a contribution, not only in Australia but overseas, and keen to work with the most able people, whatever their social or cultural backgrounds. This picture of increased international competition makes the achievement of our strategic purpose even more essential.

2. Responding to the public policy context

Political attitudes to universities have historically been, unsurprisingly, complex and contradictory. On the one hand there has been widespread recognition in Canberra and Macquarie Street of the crucial importance of universities in training the future workforce, undertaking research of significant national benefit and latterly of the contribution of higher education to economic growth. On the other hand there has been widespread impatience with the supposed ‘esoteric’ and non-commercial aspects of university research, a sense that academics are not working hard enough, a belief that universities need to operate more as businesses and be more responsive to the market, and yet a suspicion that if they become too business-like, public priorities might be ignored. Thus universities have occupied an uneasy space, enjoined to embrace the market and yet constrained from capitalising on market opportunities through elaborate sets of rules governing fee setting, enrolment targets, disciplinary mix, teaching quality and research performance. These attitudes in part reflect a broader cultural ambivalence about higher education and the strong tradition of utilitarianism in Australian political culture.

We believe that the answer to the challenges presented by this historic ambivalence may again lie in the affirmation and achievement of our strategic purpose outlined in Chapter 1. That statement offers a helpful response to uncertainty about the value of higher education. On the one hand, it affirms the Sydney tradition, beginning with Woolley, of a commitment to academic excellence, especially in the core disciplines, and to a broad understanding of the value of an education in critical thinking and generic skills. On the other hand, it affirms the Sydney tradition of bringing academic excellence to the task of social transformation, of seeing ideas make a difference in Australia and the wider world. This is not merely to reflect the ambivalences of the Australian tradition. It is to affirm that precisely the greatest social utility of our work flows from a commitment to pursuing our core activities and to pursuing them well. It is on the basis of a confidence in the specific mission of a quality research university, and the contribution that it makes to the broader community, that we must approach public policy discussions about the future of higher education.

The federal context
At the federal level, the higher education sector is undergoing significant shifts in current policy parameters. The federal Labor government has instituted a number of comprehensive inquiries into higher education (Report of the Review of Australian Higher Education, known as the ‘Bradley Report’), research and innovation (Report of the Review of the National Innovation System, the ‘Cutler Report’) and international students (Report of the Review of Education Services for Overseas Students, the ‘Baird Report’) and has working parties exploring other aspects of higher education, such as research training. The policy landscape is shifting and the University of Sydney needs to respond to these changes. It is impossible to do full justice to the range and variety of public policy changes envisaged or currently in train but a brief analysis of some trends is necessary. In particular, five aspects of the approach to higher education adopted by the current, and any likely future government, need emphasis as a context for our planning.

First, the public funding of universities is unlikely to increase significantly in the short to medium term. It is true that the current government is committed to an ‘education revolution’, and has recently devoted considerable new funding to higher education in a difficult financial period, particularly in the areas of infrastructure and research. This is an extremely welcome development from which the University has done well. Nevertheless, public investment in higher education is set between 0.5 and 1 percent of GDP, middling to low in the OECD range, and well below the levels of public investment in the United Kingdom, mainland Europe, the United States, and New Zealand. These figures also compare poorly with the levels of public investment among our regional neighbours such as Singapore, Japan, Korea and China. This relatively low level of public investment is sustainable in part because of Australia’s success in raising alternative sources of revenue for higher education through international student fees. But as we have outlined in the preceding section, this source of funding is itself far from unproblematic. While the government has committed to reviewing base funding levels during 2010, the current pressures on the federal budget are such that we cannot assume a significant increase in base funding in the short to medium term and we must accept that as a planning constraint.

Second, our planning must take into account the impact of new policies on research quality, primarily the Excellence in Research for Australia exercise. Given our strategic purpose it is imperative that the University perform well in this process. Disciplines and areas that perform poorly will be under significant pressure to improve in future rounds. How we mange this process will be explored in Chapter 4. One question that will confront the University, given our statement of strategic purpose, is whether we should be prepared to support areas that are not research intensive. This raises again the extent to which our current breadth of activity is sustainable for a University that aims at the highest quality of activity.

Third, the current federal government has committed to cultivating greater diversity in the higher education sector through a ‘compacts’ process. In other words, universities will be encouraged to negotiate distinctive missions with the government. This should provide a better context for the University of Sydney to engage in a productive conversation with the government about our statement of purpose, and its place in the wider higher education system. It will also provide the context for us to discuss with other Australian universities the opportunity to collaborate in relation to areas of activity that potentially fall at the margins of our strategic purpose.

Fourth, the Australian government, like all modern governments, is increasingly looking to the universities to focus their research and, to some extent teaching, in areas of national concern. While we ought never to see the university as a ‘think tank’ responding to the crisis of the moment, we must take seriously an engagement with issues vital to the prosperity of our nation and our region. This coincides with a need, in order to stay at the cutting edge of research, to focus our efforts in a defined number of large-scale cross-disciplinary research activities. These issues are explored in detail in Chapter 6.

Finally, and most significantly, the current government has announced that improved participation in higher education will be a key plank in its overall higher education reform agenda. Participation reform encompasses two key elements. First, the government has set a target of increasing the attainment of bachelor-level qualifications by 25 to 34 year old Australians from 32 percent, at present, to 40 percent by 2025. Second, the government has also announced a social inclusion strategy, setting a target to increase the proportion of students from low socioeconomic status (SES) backgrounds in higher education from the current rate of around 15 percent to 20 percent by 2020. Both these policies sit within a long Labor tradition of seeking to increase equity and access opportunities for young Australians. They also fit with our own purpose of attracting students of promise whatever their social or cultural background and our history of meritocratic entry. Given our constraints on growth, and our strategic purpose, it is implausible that we can contribute significantly to the achievement of the government’s target of 40 percent participation. We can and should, however, work with the government on the issue of participation by students from low SES backgrounds. This is not a small challenge for the University, as participation here by students from these backgrounds has fallen over recent years to around 7 percent. The question of attracting and working with students of promise whatever their social or cultural background is canvassed more fully in Chapter 5. It is important to note, however, that given our emphasis on cultivating the most promising students it is unlikely that the University will itself achieve a target of 20 percent from low SES backgrounds. The government has acknowledged that not all universities will be able to meet this objective. We will need to increase our proportion of low SES students, by at least 50 percent we suggest, while demonstrating a further contribution to the government’s agenda through maintaining our high progression and retention rates for such students (yet another means of fulfilling our statement of purpose).

The state context
The University’s relationship with the New South Wales (NSW) government is also an important context for achieving our aims. Australian higher education is marked by a peculiar division of responsibilities between federal and state governments. While the federal government controls funding and policy for higher education, most universities are established by state legislation and university governance regulations are largely instituted through state government provisions. In addition universities have a variety of relationships with state governments, especially with respect to research and teaching in such fields as health, education, mining and agriculture. Universities also contribute much to local economies, through financing infrastructure projects, commercialising research, and increasing the flow of population to regional and metropolitan centres, thereby growing revenue for states. Moreover universities, through such mechanisms as payroll taxes, are significant contributors to state government revenues. Thus thriving universities are a very positive contributor to state government budgets.

The area of teaching and research in the health disciplines offers an example of the often symbiotic relationship between universities and state governments. On the one hand, state governments provide significant infrastructure, resources and staffing for the training of doctors, dentists, nurses, pharmacists and other health professions. Universities would often be unable to replicate such resources. On the other hand, universities provide education and training for the health workforce of the future and have to tailor their intake of students and the education they receive to the specific workforce needs required by state governments. This can be a source of tension, particularly during periods when state health systems and hospitals are under funding pressures, forcing them to reconsider the provision of adequate infrastructure or seek a greater contribution from universities to maintain this infrastructure. Universities often maintain certain fields in health, because of the requirements to produce health workforce professionals, despite the financial penalties this entails. Some health disciplines are expensive to sustain, and can often be in deficit, but universities support them because of their commitment to the public good. Sustaining a viable relationship between universities and state governments requires recognition, on both sides, of the pressures this relationship engenders and a commitment to equitable partnership (and sacrifice) on both sides to maintain the relationship.

With respect to the specific context of NSW, universities here face a particular challenge. While other state governments, notably Queensland and Victoria, have invested in building partnerships with universities to drive innovation, and economic and social development, New South Wales has in general not engaged strategically with the university sector. Other state governments have invested significantly in teaching and research infrastructure in universities, for example the creative industries precinct at the Queensland University of Technology, the biomolecular research facilities at the University of Queensland and the Synchrotron at Monash University. This enhances the research capacity of universities in those states (bringing them additional staff, students and commercial partnerships), giving them a real advantage over universities in NSW.

If the University of Sydney is to achieve its goals, it needs to engage the NSW government more effectively in an ongoing conversation about the benefits of more strategic partnerships in knowledge and innovation. One partnership in which we are keen to engage with neighbouring educational institutions, the local community and the NSW government is the development of an ‘ideas precinct’ from the Australian Technology Park to Broadway. This would require, among other things, appropriate cooperation between the University and our neighbours in educational mission, in the infrastructure to support it (including information and communications technology infrastructure), and in coordinated contributions to the life of our local community. Another is in the appropriate training of teams of healthcare professionals to provide the NSW healthcare system with professionals already accustomed to working in a multiskilled environment. This type of active engagement with the state government and its priorities is something into which we have been putting considerable effort in recent times.

In short, the challenge from both the federal and the state context consists in our need to articulate what we do clearly, and to show why we add value to the public weal. In both contexts, we need to retain confidence in our particular mission as a quality research institution, and to demonstrate that we take seriously our tradition of engaged research and teaching, of seeing the ideas developed in the University make a significant difference in the life of the community that supports its work, even if the benefits of the University’s work are not always realised in the short term. We must avoid the equal dangers of altogether ignoring, and of being slave to, short-term assessments of the utility of our work.