Australia’s centrally-controlled system of allocating university places has failed to adjust to either student or labour market demand argues Andrew Norton. A market system, in which universities set the number of places and student fees, would do a better job of supplying Australia’s workforce. EXECUTIVE SUMMARY

Politicians and academics argue that we need more people graduating from university to meet strong labour market demand for the managerial and professional jobs to which graduates usually aspire.

• In a number of occupations, including many health-related professions, there are chronic shortages of workers, in part reflecting too few graduates.

• However, there are also half a million graduates in occupations that do not normally require university qualifications or who are unemployed.

• This reflects a mismatch between the graduates Australian universities produce and labour market demand.

• It is impossible to match precisely supply and demand for graduates; there are too many variables that cannot be predicted with precision.

• However, Australia’s centrally-controlled system of allocating university places has failed to adjust to either student or labour market demand.

• A market system, in which universities set the number of places and student fees, would do a better job of supplying Australia’s workforce.