Australian degrees are becoming ever more expensive because universities have no incentive to make them cheaper, a professor claims.

In a new paper, University of Melbourne accountancy professor Matt Pinnuck says no Australian universities have the ¡°stated objective¡± of reducing costs for students. Instead, annual reports and strategic documents proclaim every institution¡¯s ambition to spend as much as possible on ¡°grand¡± research projects.

Much of this spending is lavished on acquisitions that are ¡°difficult to reverse¡±, like buildings and additional academics. The costs of running the new facilities and paying the extra staff, combined with an average ¡°degree mark-up¡± of 18 per cent, are baked into ever-higher fees.

The report, which is being??on the university¡¯s website pending peer review, tracks the per-student costs of education ¨C including salaries, operating and capital expenses ¨C between 2004 and 2022. In real terms they have risen about 18 per cent despite technological advances and increasing economies of scale.

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Professor Pinnuck said the rising cost of education delivery was ¡°strongly associated with the increasing revenue stream from overseas fees¡±. There was little evidence that this income had delivered better quality, with no corresponding increase in students¡¯ ratings of their university experience.

Rather, the money stream had delivered lower productivity. ¡°Universities are very¡­inefficient in delivering education,¡± the paper says.

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Professor Pinnuck conceded that universities could not devote all their resources to teaching because they were legally obligated to conduct research. ¡°The question is, how much research should the university sector be doing?¡± he said. ¡°The question is never asked.

¡°Planet Earth has said everybody must go to uni¡­so universities employ all these teaching and research staff. We¡¯ve got a massive oversupply of researchers. It¡¯s supply-driven rather than demand-side driven.¡±

He said shareholders in the corporate world expected executives to provide consumers with ¡°the highest quality product at the lowest possible cost. Unfortunately, [in] the university sector¡­we don¡¯t have the external shareholders turning up to an annual general meeting and [asking], ¡®Why are these costs going up?¡¯

¡°Students simply haven¡¯t got sufficient vested interest. They just assume the adults are in charge and we¡¯re doing a good job.¡±

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The paper says the government¡¯s debt relief proposals will make matters worse by offering no incentives for efficiency.

A better solution, it says, would be for universities to adopt a ¡°cost minimisation¡± objective and demonstrate it through mandated reporting in their annual financial statements, backed up by ¡°greater accountability and corporate governance over these cost-efficient metrics¡±.

Universities¡¯ current reporting is dictated by accounting standards that ¡°are designed for for-profit entities¡±, the paper says.

Professor Pinnuck said universities routinely breached one of those standards,?, which requires organisations to report separately on the performance of their distinct operating segments.

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He said universities separately reported the revenue they earned for their ¡°two main products¡±, teaching and research, but made no attempt to separate out the costs. This robbed their students, the public and their own executives of crucial information to evaluate their performance.

¡°If you want to manage a resource, you should know the¡­investment you¡¯re making in that particular product,¡± he said. ¡°The deans and the vice-chancellors wouldn¡¯t have a clue, really.¡±

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john.ross@timeshighereducation.com