Tony Shepherd issues budget warning as university reforms stall

Australians remain in denial about the need for urgent budget repair, former audit head Tony Shepherd warns.

The tertiary overhaul includes a 2.5 per cent efficiency dividend on universities in 2018 and 2019.

Australians remain in denial about the need for urgent budget repair, former Commission of Audit head Tony Shepherd warns as the Turnbull government’s largest budget saving of $2.7 billion in proposed university ­reforms remains bogged down by political division.

Mr Shepherd said “we just can’t keep shelving expenditure reduction’’, as Education Minister Simon Birmingham conceded there was “a way to go’’ before the government locked in the numbers to support his plans to introduce an efficiency dividend on universities and force more students to begin paying back their study loans sooner.

Mr Shepherd said it would be impossible to raise taxes to the level required to meet the nation’s competing demands. “Because if we do, we just basically kill the economy,’’ he said. His comments come as the Coalition makes a third attempt to achieve the conservative holy grail of university reform and a day after a Senate committee returned a split verdict on the merit of the changes.

The tertiary overhaul includes a 2.5 per cent efficiency dividend on universities in 2018 and 2019, ties about $500 million a year in university funding to performance improvements, and ­requires graduates to begin paying back their HELP debt at 1 per cent when their income reaches $42,000. It was the largest savings measure in the budget.

Mr Shepherd, a former head of the Business Council of Australia who led Tony Abbott’s Audit Commission in search of budget savings, said higher education ­reform was also an equity issue.

“It’s quite obvious that the people who do higher education and are successful with it will earn more in the future than somebody who doesn’t, so why should somebody pay taxes who hasn’t had this advantage, pay the cost of something, and the other gets a massive free kick,’’ he said. Labor and the Greens remain opposed to the government’s reforms, labelling them unfair. Their resistance will force the government to look to the crossbench for political comfort.

Senator Birmingham yesterday argued there were no cuts to universities but a slower rate of funding growth that would ensure the system was financially sustainable and set up students and the economy for the future.

“There’s around $50bn of student debt with a quarter not ­expected to be repaid: taxpayer funding for universities has increased at twice the rate of the economy and per student they’ve seen a revenue increase of 15 per cent while costs have only grown by 9.5 per cent,’’ he said.

But peak group Universities Australia chief executive Belinda Robinson said: “Let’s be clear, this is a real cut to per-student funding in real terms over the next four years and beyond.

“These cannot be absorbed by universities without affecting student services, infrastructure, university staff, and education programs.”

Group of Eight chief executive Vicki Thomson accused Senator Birmingham of trying to “hoodwink’’ the Senate.

“Clearly, the Senate is not buying it, with two dissenting reports from the inquiry into the higher education bill recommending that the bill not be supported. The Go8 would urge the Senate crossbenchers to stick firm to this ­advice,’’ she said.