Economic modelling of improved funding and reform arrangements for universities

Economics Policy Australia
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Implementation of the recommendations of the Review of Australian Higher Education will drive Australian recovery and growth, and provide increases in future skills, productivity, exports and GDP, according to this report.

Commissioned by Universities Australia, the KPMG Econtech report indicates that real GDP would increase by an average of $1.6 billion annually over the next decade, then accelerate to an average $38 billion more annually in the 2020’s and $96 billion more in the 2030s as the full benefits flow through.It estimates the return on investment in higher education, putting all costs and benefits together, as representing a real economic rate of return of 14-15%, which is over double the benchmark set for good investment at the long-term bond rate of 6-7%.

The gains would accrue half from the high labour productivity of graduates, and half from a larger labour force and enhanced research and innovation coming from Australia’s universities, according to the report. To achieve as much as an extra $138 billion in real GDP annually by 2040 would require the reform package and outlay of the $6.5 billion over four years, recommended by the Bradley Review in the first instance, then government spending would need to move progressively to the OECD average of 1% of GDP after that. The study shows Australia has fallen well behind OECD public funding norms.

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