Published on 29/04/2016 by Punchmedia

Private vs Public Education: What's the Cost?

The Education and Training division has grown strongly over the past five years on the back of solid demand and higher government funding and is expected to grow at an annualised 5.1% to reach revenue of $118.7 billion through 2015-16. The division’s performance is influenced by population growth, changes to government policy and funding, international student enrolments and labour trends. Growth in domestic demand for education is mainly attributable to population growth, particularly in the cohort aged five to 25 years. However, the division’s expansion has outstripped population growth over the past five years due to more government funding, government policies that have stimulated demand for preschool and university education, and faster enrolment growth in private schools compared with public schools. Furthermore, underlying demand for tertiary education has increased, as people look to upskill to gain an advantage in a competitive job market.

Government Policy

The division has been affected by significant reform to education policy and funding over the past five years. As government funding is a large source of income for the majority of division participants, changes to funding and education policy significantly alter the division’s performance. The Federal Government has prioritised preschool and university education over the past five years, and introduced a new funding model for primary and secondary school education. The Federal Government implemented a demand-driven funding model in the University and Other Higher Education industry in 2012, by removing the enrolment caps for undergraduate programs supported by government funding. This led to a sharp rise in student enrolments in that industry, boosting government funding and industry revenue. The Preschool Education industry has grown at a fast rate over the past five years, due to a significant boost in Federal Government expenditure aimed at supporting universal access. The Council of Australian Governments (COAG) introduced the National Partnership Agreement on Early Childhood Education (NPAECE) in November 2008, with the aim to provide all four-year-olds with access to 15 hours of preschool education for 40 weeks by the end of 2013. In its 2008-09 Budget, The Federal Government provided $970 million over five years under the NPAECE. The final achievements of NPAECE are yet to be published. COAG endorsed the second early child partnership in 2013, to maintain universal access to preschool education. The Federal Government provided additional funding of $655.6 million in its 2013-14 Budget.

International Student Enrolments

The performance of TAFEs, universities and other tertiary education providers is heavily influenced by the number of international students studying in the Tertiary Education subdivision. About 20% of revenue generated by the University and Other Higher Education industry is for services provided to international students. IBISWorld estimates that the number of foreign students increased by 10.6% over 2014-15. Changes to student visa regulations have provided further impetus for growth. The Federal Government introduced streamlined visa processing (SVP) for students in 2012, as recommended by the 2011 Knight Review.

Public Versus Private

Although most industries in the division operate predominantly using government funds or on a not-for-profit basis, the growing number of private providers is expected to boost overall division profit margins. In the Technical and Vocational Education and Training industry, the introduction of FEE-HELP support from 2005 for full-fee paying students at accredited providers boosted enrolments. This prompted expansion in the private sector and a gradual increase in profit margins. The demand-driven model, which has been adopted in several states, has also increased the number of private enterprises. Despite this, merger and acquisition activity in the private sector and the exit of providers unable to meet stringent operating requirements, particularly in preschool education, have offset this expansion. As a result, the number of division enterprises has remained stable over the past five years. Enrolments at private schools have grown at a faster pace than enrolments at public schools over the past five years. This shift is attributable to higher household disposable income and the perception that private schools provide better quality education. As parents have enrolled their children at more expensive schools, revenue derived from student fees has increased significantly, boosting division revenue.

Cost Concerns

As the division has expanded to cater to a growing population, employment has also grown. However, the nature of employment has evolved as enterprises have attempted to curb wage rises and increase flexibility in response to changes in revenue. This is evident in the University and Other Higher Education industry, where the workforce has become increasingly casualised. However, the number of full-time equivalent employees in public and private schools is expected to grow over the period. Staff-to-student ratios have gradually increased over the past decade, led by changes in government and Catholic schools. Even as public and private schools successfully attract teachers, other industries (such as preschool education and higher education) are struggling to maintain and recruit staff. Universities have had some difficulty recruiting and retaining academic staff, particularly in business and computer science disciplines, as academics have increasingly been lured into more lucrative private work or overseas teaching positions.  

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

Author profile

Related articles

Public Trust in Australian Businesses Soars

06/02/2014 by bill.tamva

Public trust in Australian businesses is currently at its highest in five years, according to the newly released Edelman Trust Barometer, which examines the levels of trust across the institutions of government, business, NGOs and media. According to the 2014 Edelman Trust Barometer, 59 per cent of Australia’s informed public trust Aussie businesses, rising 11 points from the previous year. Australians also now expect busi...