Performance-based funding for the Commonwealth Grants Scheme

Report for the Minister for Education – June 2019
Federal government Government expenditure Government grants Higher education Higher education reform Educational finance Australia

Australian higher education is a strong world-class sector. The performance-based funding scheme contributes to the evolution of the whole higher education funding system by balancing certainty with greater responsiveness to public funding system priorities on teaching and learning, while respecting sector differences.

Performance measures can be complex and challenging. An analysis of the performance funding models across a number of countries further indicates that there is no ‘ideal’ model, with each model showing strengths, weaknesses and policy trade-offs. Acknowledging the complexity of this task, the Panel sees the merit of implementing the scheme in 2020 with a simple and resilient model that is predictable with low administrative complexity. This will allow adjustment to shifting national priorities and the changing higher education landscape over time.

While stakeholders’ views on the design and implementation of the scheme are varied, importantly, we have a broad consensus on a contextually responsive scheme that recognises sector differentiation. The contextualisation of design elements would mitigate the potential perverse outcome of driving sector convergence.


Recommendation 1. The performance-based funding scheme should be designed to: create more accountability for the spending of public money on specific national higher education priorities; promote and develop sound performance assessment of teaching and learning at universities; and create financial incentives to improve specific areas of university performance.

Recommendation 2. The performance-based funding scheme should be fit for purpose, fair, robust, and feasible. The model should be simple and be reviewed periodically and refined to ensure that it continues to meet its design objectives.

Recommendation 3. The performance-based funding scheme should use a standard national population growth rate for all universities.

Recommendation 4. The performance-based funding scheme should adopt a ‘cumulative limited’ approach from 2021, whereby the amount of performance-based funding for which a university is eligible would accumulate over time until it reaches 7.5 per cent.

Recommendation 5. Unallocated funding (which should be retained in the higher education sector) should be provided to universities under conditions negotiated between the Department of Education and the university.

Recommendation 6. The performance-based funding scheme should be contextually responsive and simple. This will mitigate potential risks of driving sector convergence and an overcomplicated system.

Recommendation 7. The performance measures should be core only and set by the Government.

Recommendation 8. Universities should have an option to provide a brief qualitative submission, noting that the submission should focus on those measures where incremental improvement could drive the overall performance of the university.

Recommendation 9. Student experience should be a performance measure, as measured by student satisfaction with teaching quality for domestic bachelor students.

Recommendation 10. Graduate outcomes should be a performance measure, as measured by overall graduate employment rates for domestic bachelor students.

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