Underfunded universities a bigger threat to entrepreneurship than fee deregulation, say experts

Atlassian co-founder Scott Farquhar says he would not have entered business with a large student debt as the Senate last night voted down the federal government’s university fee reforms, but a leading expert warns the alternatives are even worse for entrepreneurs.

In a statement issued before last night’s vote on the university fee deregulation reforms, Education Minister Christopher Pyne pointed out the government had already accepted key cross-bench amendments to its proposed legislation, which if accepted, had the potential to significantly increase the cost of a university degree.

“The bill is a crucial reform and this is recognised by an historic consensus of the higher education sector. It is very important that it pass the Senate this week to give students and universities certainty,” Pyne said.

“The government has already accepted Senator Bob Day’s amendment to keep the indexation of HECS at the consumer price index and agreed to Senator John Madigan’s amendment for a HECS interest pause for new mums and dads.”

Despite the amendments, the federal government’s reforms were voted down in the Senate by Labor, the Greens and the Palmer United Party, along with independent senators Nick Xenophon and Jacqui Lambie.

In comments published by BRW, Farquhar said it is unlikely he would have gone into business if he had a significant student debt.

“If I had $100,000 in uni debt, would I have taken the risk of starting up my own thing? Probably not,” Farquhar said.

“I would have been way less likely. Maybe Mike still would have, he’s from a wealthier family, but for me it would have been way harder and I would have been way over my head.”

In a statement to SmartCompany, Farquhar says Australia has an opportunity to be a giant in a world in which technology is reinventing traditional industries, but it also risks missing the boat entirely.

“At the tertiary level, the trends locally are going in the wrong direction: enrolments in computer science are actually falling. Despite demand for ICT workers in doubling over the last 15 years, applications for tertiary ICT courses has more than halved over the same period,” Farquhar says.

“This lack of university interest probably starts at the school level, where there is no uniform national requirement to teach computer and software skills.”

The Grattan Institute’s higher education program director, Andrew Norton, told SmartCompany it is unlikely higher student debt would be a significant disincentive to anyone wanting to start a business.

“The counterfactual to that is the US, which both has higher fees and is more entrepreneurial than Australia,” Norton says.

“The thing about our loan system is that it’s linked to income, so it allows people to take risks. It would be a waste to spend more on higher education subsidies on the off chance one or two entrepreneurs are deterred.”

According to Norton, the alternatives to fee deregulation could have more damaging implications for Australian businesses.

“The difficulty is that no one is happy with the status quo, but no one is happy with the alternatives either,” he says.

“Next year, universities will be squeezed. The risk is that in particular courses, universities will either have to move out of offering courses in some areas or continue to offer those courses with a bias towards international students.”

“So the government has two options left if it can’t pass fee deregulation. That’s either to have substantial cuts to research, or put controls on student numbers. Both have negative implications for entrepreneurship.”

While the ways in which research cuts could negatively affect Australian businesses are obvious – especially for businesses in fields such as medicine or technology – the longer term implications of a cap on student places could also be dire.

“We’re heading to a significant surplus of students at the moment. But looking towards the 2020s, early in the next decade a frozen number of student places would not cope with applicants when baby boomers start to retire,” Norton says.

An analysis of the university backgrounds of the chief executives of 100 ASX-listed companies conducted in 2012 revealed 35 studied either science or engineering at an undergraduate level at university.

However, many leading Australian entrepreneurs, including Rupert Murdoch, Lang Hancock, James Packer and Frank Lowy have either never completed or never attended university.

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