OECD figures are not what they seem in higher education

In any campaign, truth is an early casualty. Political leaders use simple facts and figures to prove one policy good, another bad. But reality is more complex. As John F. Kennedy said to students at Yale in 1962:

“The great enemy of truth is very often not the lie – deliberate, contrived and dishonest – but the myth – persistent, persuasive and unrealistic.”

Scholars have a duty to debunk such myths with independent analysis. But our own sector has skin in the policy game. How well do our claims for better funding stack up?

Not as well as one would think. Often, our sector recycles simple OECD metrics. These suggest we are badly under-funded compared with universities elsewhere.

“Australian universities are public institutions in which we significantly under invest … for the latest available figures Australia finished 27 out of 32 countries for public investment in tertiary education at 0.9% of GDP. This is only three-quarters of the OECD average of 1.2% of GDP and has us trailing the Slovak Republic, Mexico and Spain.”

Drawn from the latest Education at a Glance report, this Group of Eight claim is technically correct.

But in real resource terms we do not “trail” Spain. In 2012 our total (public and private) tertiary spending was 1.6% of GDP, the OECD average was 1.5% and Spain’s was 1.2%. In the OECD’s “purchasing power parity” estimates, Australia’s total spending was US$18,800 per university student, the OECD’s $15,100, and Spain’s $13,000.

Yet experts often lament our low rates of public spending. These metrics look definitive, as last year’s pre-budget submission from Universities Australia highlighted.

Again, the statistics are accurate. From the same OECD data some experts “ranked” Australia 33rd of the 34 OECD countries. Why must we be such an “outlier”, spending 0.7% of GDP when the OECD spent 1.1% and countries like Canada spent 1.6%? Unlike Canada, Australian funding seems to fall further year by year, as shown in Chart 2.

What the OECD metrics don’t show

These simple headline metrics tell half the story. Reality is more complex.

For a start, the “latest” OECD figures are always out of date. Chart 3 from a recent government report shows strong growth in Australian spending from 2011 to 2014. This has only begun to appear in OECD reports.

Second, our Higher Education Loan Programme (HELP) is publicly financed, but classed by the OECD as private spending. None of the sector’s HELP revenue in Chart 3 appears in Chart 1. But governments pay this directly to institutions along with teaching grants.

Third, our “outlier” status is based on percentages of each country’s GDP. On this view OECD rates rose as ours fell (until 2012).

In 2013, the Green party claimed that the gap between our rate and the OECD’s amounted to a A$10.3 billion funding shortfall.

Australian GDP is not OECD GDP

But such estimates overlook the way our GDP growth has outpaced the OECD’s. From 2000 to 2014, Australian GDP grew by 50%. In Greece, Italy and Portugal it grew 1% or less; in Denmark, 8%; Germany, 15%; France, 16% and Spain, 21%.

Chart 5 shows an OECD average of 26%. Australian spending looks lower due to our higher GDP growth.

Tertiary spending is not university spending

Finally, the metrics in Chart 1 include vocational education spending. In Australia we cite these as proxies for “university funding”. This is probably because OECD metrics on university level programs don’t show public spending on its own.

As Chart 6 shows, countries such as Austria, Canada, France and Spain support larger non-university sectors than in Australia or the United Kingdom. In 2011 Canada put over a third of its total tertiary spending into non-university programs while we spent less than one seventh.

So, why we can’t fund our universities as they do in Canada? If we did, our tertiary spending would rise and our universities would benefit. But more funds would flow to non-university programs in a reshaped tertiary sector.

Second, the OECD reports that in 2013-14, Canada charged students more for bachelor degrees than Australia did.

And third, Canadian student loans are less generous than our HELP loans, which have hidden public costs. Canadian loans attract real rates of interest and must be repaid regardless of income.

Simple OECD metrics often lead to mythical claims about relative under-funding. These are not as real as they look “at a glance”.