Australia’s graduate labour market does not always seem to function well. Graduates with degrees in some fields struggle to find suitable work, while employers cannot fill vacancies in occupations that rely on graduates.

The former Morrison and current Albanese Governments share an interest in these problems, but with contrasting policy responses.

To steer student choices, the Morrison Government’s Job-ready Graduates policy discounted student charges for preferred courses and doubled them for courses deemed less ‘job ready’. But it did not intervene in university supply decisions, instead giving universities more flexibility in moving public funding between courses. It was a demand-side intervention.

The Albanese Government’s Australian Universities Accord review aims to replace Job-ready Graduates with supply-side interventions, increasing or decreasing numbers of student places in different courses according to perceived needs.

The Universities Accord interim report is vague on important details. But its authors clearly want to replace current decentralised modes of decision-making, under which universities and students coordinate the allocation of student places to courses, with a more centralised and bureaucratic system of control.

A new regulator, the Tertiary Education Commission (TEC), would be responsible for increases or decreases in student places by courses at each university. It would be guided in these decisions by Jobs and Skills Australia, a government labour market analytics agency.

The centralised approach preferred by the Universities Accord interim report is unlikely to outperform the more flexible block grant or demand driven systems. Its decision making would be on a bureaucratic cycle, responding more slowly than universities observing changes in student applications. Bureaucratic systems could lock public funding into yesterday’s labour market needs, causing stranded resources that cannot be used effectively.

Australia’s one long-term experience of bureaucratic allocation of student places, for medical courses, is not encouraging. Australia relies on doctors from overseas and has many doctor job vacancies.

The Universities Accord final report goes to the government in December. It should drop its plan for more university bureaucracy. Decentralised decision-making by universities and students is a lower-risk way of achieving its labour market goals.