Australian Financial Review Higher Education Conference
Keynote address – Mr Terry Moran
Secretary, Department of the Prime Minister and Cabinet
Sofitel Wentworth Hotel, Sydney
28 June 2011

Good morning and thank you for that introduction.

Before I begin, I’d like to acknowledge the traditional owners of the land we meet on today.

I’d also like to acknowledge: Minister Evans, Vice-Chancellors and Deputy Vice-Chancellors, Lisa Paul (who will speak directly after me), special guests.

Thank you to the Australian Financial Review for inviting me to be with you today. I’m delighted to be speaking at an event like this one, gathering together experts from across the country to discuss the future of higher education in Australia.

Structural changes in the Australian economy present a complex series of challenges and opportunities.  It is timely for us to enter into a serious conversation about what needs to be done to ensure that Australia has the higher education system that it needs in the 21st century.  I’m an optimist about the future of our higher education system and, also, an optimist about Australia’s ability to do well out of the profound economic change ahead of us.

A few months ago, along with others, I met with Johnny Grimond, a senior writer from The Economist, to talk about Australia.  The Economist wanted to know whether things in Australia are as good as they look from overseas – and when Mr Grimond found that they mostly are, he wanted to know why things are so good.

My senior colleagues and I discussed Australia’s proud history of reform over several decades – reforms to our financial markets, our markets for goods and services and our labour market. We also talked about Australia’s enviable record on social policy, which has always been a vital part of our reform story, and which I believe will only become more important as our economy changes.

The Economist, in its feature on Australia a few weeks ago, retold the story of successful reform in Australia. But it also presented some criticisms.

The Economist isolated our higher education sector as an area that could be performing better. To quote briefly from the article, it commented that Australia “has six or seven good universities, but even the best of these... do not do brilliantly in world rankings”. On universities, it concludes, “[i]f Australia is to complete in anything other than iron ore, it will need a highly educated workforce.”  The assessment is a little harsh but the conclusion is right.  There is no standing still for our country or our universities.  Australia will face heightened pressures on the economic front and behind our universities are the determined Asian universities which aspire to displace Australian universities in the rankings.

Today, I will put this comment in context by addressing four questions.

  • What does business need in order to succeed in the modern economy?
  • Why is education critical for the future of Australia’s economy?
  • What might success in our tertiary sector look like?
  • And how does university performance look from a public service perspective?

Australia’s reform history is evidence – in case we needed any – of our ability to adapt Australia’s economy and society to help us to thrive in the Asian century. The tertiary sector provides a vital bridge between our economic needs and our social policy needs as structural changes in our economy accelerate and disrupt old assumptions about the basis for success.

1. What does business need in order to succeed in the modern economy?

The summary of Australia’s economy published in The Economist was a timely reminder of some of the many reasons to be optimistic about Australia’s economy. We have a talented and nimble workforce, and effective regulation that leaves businesses with room to be creative in what they produce and how they produce it. Just as the Australian Government remains committed to reforming our economic, environmental and social policy to meet tomorrow’s needs, many of Australia’s businesses have repeatedly recreated themselves to take advantage of the possibilities that exist around the corner.

The Australian economy depends on productivity growth in the coming decades so that we can compete internationally where we are well-placed to do so and adapt quickly to changes in the global economy. Achieving the productivity growth we need is a role for business more than it is government – but government can help with the framework that facilitates productivity growth driven within firms. That includes ensuring firms have access to some key resources they need to succeed. For most Australian businesses outside the resources sector, people are by far the most important resource.

Our business environment helps to determine our human capital needs. From an international perspective, at a time when many countries are struggling with the aftershocks of the global financial crisis, our human capital needs probably seem an appealing challenge.  Our prosperity demands constant innovation from Australian businesses seeking to manage the competitive pressures caused by the combination of low unemployment and a historically high currency and terms of trade.  Our people are the X factor given that it is their capacity for creativity and innovation which will make the difference.

To thrive and to grow, an Australian business needs a deep understanding of its processes, so that it can drive efficiency through performance management and by improving the productivity of its operations. It needs to seek relentlessly to add to the value it delivers to its customers, as ultimately, Australian firms cannot compete with Asia in the production of large quantities of low cost, low complexity manufactured goods. The successful Australian firm needs to use its talent effectively, including through the right training and skills development. To manage the changing conditions that are an inevitable feature of the modern business environment, it needs strong strategic leadership. And finally, the successful Australian firm will not succeed alone. It will rely on good relationships with other businesses, with the broader private sector and with government.

This list of essential qualities for the modern Australian business contains important lessons for the tertiary sector. It reveals why Australia will depend even more on outstanding research and teaching from our universities in the years to come. And it provides important context in developing a view about what a successful tertiary sector should look like.

2. Why is education critical to the future of Australia’s economy?

There is a vital connection between the preconditions for business success and the performance of Australia’s universities. Our economy can meet its potential only to the extent that Australia’s tertiary sector can teach its students to be great thinkers and innovators.

The education sector supports the economy in two critical ways.  First, it develops in citizens the knowledge and skills they need to contribute productively to the workforce. As well as being highly skilled, the workers we need are those who think deeply and expansively, who can innovate and lead change. They are likely to be workers who have spent several years in the most stimulating tertiary environments. Their study will have challenged their views, encouraged their ideas and given serious time to thought, debate and planning about the future of their field.

But it might not be enough for our best workers to be highly-skilled innovators. They will also need to be adaptable, because the opportunities that exist for Australia in the global economy today will be very different from the opportunities in 10 or 20 years time. Today, we are providing the resources to help Asia grow its middle class. Before long, our most successful industries will be those giving an established Asian middle class the goods and services it wants. So Australia’s knowledge workers might be employed in the resources sector and later, take on a management position in a services firm.

Already, around 15,000 Australians join the workforce each day. We should see this dynamism as an opportunity, allowing our best qualified workers to share more broadly the expertise and perspective they have gained from a particular occupation, business or sector. It means that our universities need to make sure that their graduates are not only highly-skilled but are agile. It also means that many Australians will return to higher education later in life to update or broaden their expertise. Already, our universities are getting better at responding to student demands by giving those juggling responsibilities the flexibility they need, for example through intensive courses and online lectures.

Secondly, the education sector is critical to the future of Australia’s economy by contribution to the national research effort. Its contribution to research and development in many industry areas gives Australian firms an international advantage. 

Collaborations between universities and business help the products of research be translated into commercial successes, and they have helped to develop some of Australia’s most innovative products in recent years. Speaking to a Sydney audience, I feel it’s only right to use a Melbourne example as inspiration. Cochlear implants have been an outstanding example of collaboration between the private sector and the University of Melbourne. That same university is now working with industry researching the development of a bionic eye. These developments are part of a larger initiative that brings together researchers and developers across sectors. The Parkville precinct, supported by Governments, philanthropy and the University itself, has helped to encourage collaboration between a number of health, research and education institutions on the northern edge of Melbourne’s CBD. Translating the ideas of outstanding researchers into marketable products does not only provide economic benefits: the collaboration has also helped to raise standards in Melbourne’s hospitals.

There is a third major role for Australia’s higher education sector. When it works well, higher education provides an escalator of economic and social mobility for the most talented in society, whatever their personal circumstances.  The most successful democracies are those in which education and career opportunities are not limited by a person’s background. Entrenched disadvantage is a notoriously difficult and complex policy problem. Few institutions do as much to expand the possibilities of Australians as our schools, universities and TAFE!

3. What does success in our tertiary sector look like?

A successful tertiary sector will bring together quality and timely research with outstanding teaching. In addition, it should promote social mobility and enable connections between universities and other parts of Australia’s education system.

The most common way of assessing a country’s higher education system is to look to university rankings. This is a helpful place to start, as rankings tend to focus on the research output that is among the most important functions of the tertiary sector. Australia does well in international rankings – although we could certainly do better. Given Australia’s size and its wealth, I believe over the coming decades we could reasonably aim for an Australian university to be placed in the top 10 worldwide.

Taking a broader view of the role of research and development in promoting innovation in our economy, the best universities will be sufficiently tuned to their particular contribution to the industry sectors where Australia will have greatest success in future. There is no one answer for how to achieve this, except that universities need the freedom to constantly adapt to changing demands from business and industry.

Australia’s prosperity will be enriched by universities with research and development capacity that provides a reliable base for innovation and creativity in the economy. Our record on this score is mixed; while we have plenty of examples to be proud of, researchers have often encountered difficulties in translating the products of research through commercialisation into the economy.

These broader considerations are only part of the reason why university rankings do not give a full picture of the impact and effectiveness of our higher education system. In my view, we will know that Australian universities are succeeding when we see three things.

First, successful universities will allow Australian students to reach their potential through the educational experiences that are available to them. Students should attend feeling challenged, and emerge feeling enriched. [And before our best students even reach university, there is more that our schools can do to encourage and extend our brightest young minds.]

Secondly, we will know that Australian universities are succeeding when the backgrounds of students coming into universities are changing.  Over recent years, a push by government to improve the representation of students from low socioeconomic status (SES) backgrounds in our universities has seen some progress. Between 2005 and 2009[1], the proportion of our university population that came from low SES backgrounds has increased by more than half a percent, from 15.3 per cent to 15.9 per cent. This is an unimpressive small change. The small change of half a per cent reflects an increase in the number of low SES students in our universities from 39,000 to 49,000 between 2005 and 2009.

There is still a long way to go. Many of Australia’s most highly sought-after degree programs continue to be crowded with students from higher socioeconomic groups, and sometimes from only a small cluster of schools. As with the debate over gender, we are neglecting large numbers of talented people whose contribution could make a difference.

Maximising the movement into universities of vocational education students with diplomas and advanced diplomas is a third indicator of a successful tertiary sector. This kind of crossover helps our universities to be the escalator for social mobility that I mentioned earlier, and ensures that our educational institutions are working effectively together so that Australians have access to as much specialised education as they want or need.

4. How does university performance look from a policy-maker’s perspective?

There are two university contributions that are of particular interest to a person such as myself. The first is the quality of graduating students; the second is the quality and usefulness of academic research.

As a senior public servant, I have no complaints about the quality of graduates, as my organisation recruits some fabulous young people from universities across Australia. These are rounded and well educated graduates who quickly become useful members of their teams and who adapt successfully to the constantly changing environment at the centre of government.  Nonetheless, there is usually a discontinuity between how people have been trained and what it takes to be successful as a policy analyst.  The experienced economists in Government will attest that a great focus on the mathematical is not balanced by an understanding of the broader forces at work in the economy.

But in terms of research output, I do feel that there is a growing distance between scholars and the world of public policy. Universities are centres of critical inquiry and comment. Government, industry and students themselves rely on universities to be engaged in important issues – not only to participate in big conversations, but to start big conversations. These are the kinds of conversations that might help to balance media comments that focus on today, or this week, or last year.

When researchers are spending time investigating particular questions of public policy, a good relationship with public servants will help both academics and policy-makers to do our jobs better. The evidence and insight scholars produce can enrich public policy but too often, it is lost in the grinding mills of scholarship and unrelated to work in other disciplines.  Most public policy draws on many disciplines.  Universities struggle to knit disciplines together around the major problems of our times. 

I think the research community and the public service need to find new mechanisms to apply the products of scholarly work to public policy, mechanisms able to adapt to the changing focus of public policy.

From within government, most difficult policy questions require extensive collaboration across government in short timeframes.  Isolated scholars in the humanities and social sciences find it hard to be heard or contribute in time.

While we still talk broadly about public policy, for modern governments policy implementation is just as important as policy design. For academics to produce the most useful advice to governments, they should be thinking not just about how things should be, but about how to make them happen. The kind of insight that will help scholars to produce practical advice is best gained by more cross-over of our people between academia and public policy: by academics spending more time outside universities, and public servants spending more time outside government offices. Improving the working relationships between policy makers and academics, I believe, will go a long way to increase the impact of the research taking place in Australia’s universities.

Conclusion

The decades ahead provide plenty of opportunities to meet the challenge offered by The Economist, as our education system finds ways to support structural changes in our economy and society. I’ve spoken about vital connections between our prosperity and our higher education system. There is every reason for industry and universities to collaborate as the economy changes: so that Australian businesses have the workers they need, so that the work of researchers reaches its widest possible audience and so that Australians receive the education they deserve.


1. DEEWR / ABS – Selected Higher Education Student Statistics, 2005–2009 

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Last Updated: 28 June 2011