The cash nexus: how teaching funds research in Australian universities

by Andrew Norton

More than $2 billion in surpluses from teaching are being used to fund research in Australian universities. On a conservative estimate, one dollar in five spent on research comes from surpluses on teaching.

International students, who usually generate more revenue per student than domestic students, contribute a substantial proportion of this surplus.

University research matters to Australia, but the evidence that it improves teaching is less clear. Direct spending on teaching, by contrast, is far more likely to ensure that universities offer the high-quality courses students want.

Universities earn up to $3.2 billion more from students than they spend on teaching, and have powerful incentives to spend the extra money on research.

Although research spending has tripled in the past two decades, academics still want to do much more research than is currently funded. And universities worry about their position in research-driven global university rankings.

Higher education policies need to ensure that universities spend money intended for students on teaching and student services.

Until we track university expenditure more carefully, we will not understand exactly how universities spend $11 billion in student subsidies and loans and $6 billion in fee revenue.

With improved data, taxpayers and students will know what they’re paying for when they invest in university education. And government will better understand what incentives can ensure that universities spend any increase in fees for the benefit of students.

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