The Challenge
Australia faces significant changes to its social and economic environment through an ageing population and increasing international competition. The nation must invest in developing a world‑class education system and drive development of a workforce that is highly skilled, flexible and adaptable in responding to increasing global competition for skills.
The Government has a responsibility to position Australia as a competitive, innovative and knowledge‑based economy that can adapt, compete and win in global markets, and respond to changing demands. This is a forward‑thinking approach focused on securing long‑term gains to build Australia's future prosperity.
This prosperity can only be guaranteed by long‑term productivity growth and workforce participation. This requires a particular focus on our young people. Australia has an ageing population (Chart 1) and these changing demographics present productivity and participation challenges.
Chart 1 — Demographics
Australia—2007 |
Australia—2051 |
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Source: ABS Population by age and sex, Australian states and territories, June 2007; and ABS Population projection, Australia, 2004 to 2101.
As the post‑war 'baby boom' generation moves into retirement and people are living much longer, the proportion of the population in the labour force will decline by as much as seven percentage points (Chart 2). The Productivity Commission estimates that, in the absence of policy responses, this ageing of the population will cut per capita GDP growth rates by as much as half1.
Chart 2 — Projected workforce participation rates from 2004 to 2044
Source: Productivity Commission, 2005, Economic Implications of an Ageing Population, Canberra.
Better education outcomes lead to increased productivity, participation and prosperity
A key challenge for Australia is how productivity growth can be lifted to sustain its economic prosperity. There is clear evidence that education and skills are among the strongest guarantees of individual prosperity, social mobility and economic security.
While Australia's education system performs reasonably well in international assessments, our performance has fallen over recent years and there are challenges and room for improvement in each education sector, especially in bridging the gap between Indigenous and non‑Indigenous Australians.
The data presented in this Statement highlights areas where more needs to be done to ensure Australia's education system is well placed to provide Australian children with the best start in life. It also reveals, however, that better data and evidence are required in many areas if all governments are to target their investments where they will have the greatest impact, and monitor properly the effectiveness of their interventions.
The critical early years
Research suggests that children cultivate 85 per cent of their intellect, personality and skills by the age of five2. This research on the development of the human brain has shown that the experiences that children have in the early years of life set neurological and biological pathways that affect their health, learning and behaviour throughout their life. The relationships parents have with their young children can also be a crucial determinant of later wellbeing. The opportunities and access young children have to early learning are crucial.
Evidence also shows that providing access to high‑quality early education programs in the year before formal schooling is one of the best ways for government to help children from disadvantaged backgrounds get the best possible start in life3. High‑quality education programs in the early years have a profound effect on children's development, influencing their ability to learn, their acquisition of early literacy and numeracy skills and their capacity to regulate emotions. Early learning eases the transition to primary school and has a direct and positive impact on future educational, employment and health outcomes. Over the longer term, early childhood education generates substantial cost savings from improved health and productivity and reduced expenditure on social services.
A strong case for investment
The Nobel Prize winning economist, Professor James Heckman, has found that investment in the early years is significantly more cost effective than remediation in later years4. Heckman has demonstrated that early interventions for disadvantaged children increase earnings and promote social attachment, with returns to dollars invested on earnings gains alone as high as 15‑17 per cent. In addition, Heckman's cost‑benefit analyses of US early childhood programs document the positive effects of early childhood interventions on IQ and a wide range of social behaviours.
Access to early childhood education in Australia
Too many Australian children are missing out on an early childhood education. It is estimated that in 2006 at least 56 000 (around 20 per cent) of all eligible children in Australia did not access early childhood education prior to commencing school.
It is particularly shocking that the most disadvantaged of children — those who stand to gain the most from early childhood education — are most likely to miss out. Less than half of Indigenous children currently receive an early childhood education.
Australia has a fragmented early childhood sector, with a patchwork of services, funding and regulations. The extent of provision and equity of access varies widely across the states and territories. Very few children receive the best practice 'dose' of 15 to 20 hours of early learning a week in the year before school.
The best available data shows that Australia spends just 0.1 per cent of GDP on preschool compared with an average OECD expenditure of 0.5 per cent, and is ranked last in the OECD for expenditure on pre‑primary education. This reflects that in the past, the Australian Government's focus had been on the provision of care, rather than early learning. Child care had been only seen as a means to increase the workforce participation of parents, leaving preschool services to be predominantly a state and territory government responsibility. While some child care services are moving into the provision of early learning, coverage is far from universal.
Schooling
High‑quality schooling provides children with the strong foundations they need to reach their potential throughout their school years and beyond. The capacity of Australia to compete in the global marketplace increasingly depends on our ability to develop a broader base of higher‑level skills. Additionally, to have a vibrant and supportive local economy we need young people who feel valued and can meet our regional community needs. This domestic and international agenda requires improvement in the quality of schooling outcomes and a more equitable distribution of skills.
International comparisons indicate that the keys to achieving a world‑class system are quality teachers and ensuring that the school system is able to deliver the best possible instruction for every child5. In order to maximise their experience at school, children need to master the fundamental learning tools of literacy and numeracy. Without these, children will be impoverished learners and unable to contribute fully to society.
Australia boasts many excellent schools, as well as high‑quality dedicated teachers and principals. On average, and compared with other OECD countries, most Australian school students are performing well. The OECD's Program for International Student Assessment (PISA) results for 2006 show that the average performance of 15 year olds continues to be significantly better than the OECD average.
However, the performance of the schooling system has been allowed to drop relative to that of other countries in the OECD:
- In the period between 2003 and 2006 Australia declined in both its absolute and relative performance in reading literacy, and its relative performance in mathematical literacy.
- Australia has too long a 'tail' of underperformance linked to disadvantage. The PISA results indicate that over the last six years the percentage of students who are less than proficient at reading or maths has not reduced.
- International testing also shows that the reading performance of Australian students at the high end of the achievement scale has declined between 2003 and 2006.
Getting the basics right
Low levels of literacy and numeracy have a particularly devastating effect on future educational attainment. Lower literacy and numeracy skills in Year 9 have been associated with lower engagement in school, lower retention to Year 12, lower tertiary entrance scores and fewer successful transitions from school.
Literacy and numeracy skills are fundamental to shaping an individual's capacity to be an active and productive participant in the economy and in society6. The Government understands that the reasons why students from disadvantaged backgrounds do not make it to higher education usually have their roots far earlier in life. Unless children develop essential learning skills early in life their educational progress will be held back.
Australia's current education report card shows that some of the nation's students are falling behind in these critical areas.
Students who are struggling to get the basics right are more likely to come from low socioeconomic status (SES) backgrounds. Inequality attributable to socioeconomic factors remains and, on average, Indigenous students continue to be more than two‑and‑a‑half years behind non‑Indigenous students. Education and schooling are therefore a crucial part of the social inclusion agenda as Australia needs to do much more to reduce the impact of disadvantage on educational outcomes.
Despite governments and school systems implementing a range of approaches in literacy and numeracy, the performance of Australian students overall is not improving.
Currently around one in 10 students suffers a serious level of educational disadvantage, according to the 2006 National Report on Schooling in Australia. This report shows that on average:
- 7 per cent of all Year 3 students do not meet relevant reading, writing and numeracy benchmarks;
- 9 per cent of Year 5 primary school students do not meet each of the literacy benchmarks; and
- 10 per cent of Year 7 students are below the benchmark level for reading and more than 7 per cent achieve below the benchmark level for writing. Just over 20 per cent of Year 7 students are not meeting the benchmark levels for numeracy.
Year 12 retention and attainment
Evidence shows that achieving Year 12 or an equivalent qualification improves outcomes for young people, including increasing the likelihood of getting a further qualification, getting a job and earning more7. However, apparent retention rates have not increased across Australia since 19928 (Chart 3).
Australia is in the bottom half of OECD countries for the percentage of the post‑school population attaining the upper secondary school level qualifications of Year 12, or its equivalent.
Chart 3 — Apparent retention rates Year 7/8 to Year 12 1980 to 2007
Source: Australian Bureau of Statistics, 2007, Schools Australia, Cat No. 4221.0Transitions from school to further education, training or work
Transitions from school to further education, training or work
Key statistics show that while most young people are making smooth transitions from school, some are not. There is a group, comprising around 3 to 6 per cent of each cohort, that makes a particularly poor transition, with practically no work or study in the first four years after completing school9.
Past approaches to improving the transition of young people from school to further education or employment have involved some collaboration between schools, industry and local communities. However, the lack of cohesion across educational systems and jurisdictions has hampered integrated approaches to improving career development and transitions.
Where education and skills have not been adequately attained during school, a system of skills development as part of lifelong learning is required
Skills and Training
Stronger productivity growth is critical to maintaining Australia's international competitiveness.
Australia's vocational education and training system needs to build a highly‑skilled workforce to respond to the next wave of economic reform and position Australia strongly in an increasingly competitive international market for skills. In order to cope with the challenges of today and the changing workforce of the future, the system must be appropriately resourced and efforts redirected to target skills shortages and respond to the needs of industry.
Despite warnings from the Reserve Bank over a number of years, serious skills shortages have emerged across the economy. Underinvestment and poorly‑targeted programs have done little to address looming problems with workforce capability, which now threaten economic growth through increased inflation and higher interest rates.
While long‑term projections for qualifications should be treated with caution, research by the Centre for Economics of Education and Training (CEET)10 suggests that the VET sector needs to supply a total of 2.47 million qualifications with the highest growth areas at the Australian Qualifications Framework (AQF) diploma and advanced diploma levels by 2016. Based on current supply, there will be a net shortfall of around 240 000 people with VET qualifications. This would require a 5 per cent per annum increase in investment, taking account of the need to train in higher‑level qualifications. This shortfall will not be filled by new entrants alone and will require a focus on those already in the workforce.
These are conservative projections which do not factor in the additional potential effort needed to increase labour force and educational participation among a range of cohorts, including early school leavers and low‑skilled adults.
CEET's modelling forecasts a significant increase in employed persons in higher‑level occupations in the decade to 2016 (Table 1). The shaded boxes show the large projected growth rates in the three high skills occupation groups — managers, professionals and associate professionals.
Table 1 — Employment forecasts for 2016 by occupation and qualification,
Australia ('000)
Source: Unpublished ABS Labour Force survey data, August 2005 to May 2006 (ABS Cat. no. 6202.0) and CEET extrapolation of Monash Economic Forecasts (CoPS December 2005).
Table 2 provides an analysis of the expected gap in the supply of, and demand for, people with VET qualifications. The shaded rows indicate the area of greatest projected shortfall — at the advanced diploma and diploma levels. The VET sector needs to quadruple the number of advanced diplomas and double the amount of diplomas to meet projected demands.
Table 2 — Gap in the supply of and demand for persons with VET qualifications in the 10 years to 2016, Australia
Source: Same as Table 1. Note: All data relate to 15-64 year olds excluding overseas students.
The gap between current supply and projected demand for workers with Certificate III qualifications is less than for diplomas and advanced diplomas. However the quantum of delivery at Certificate III and its focus on training for tradespersons for Australia's critical industries (for example, building and construction) means that Certificate III training will retain a vital role in the future workforce. The net projected shortfall of 240 000 qualified persons with VET qualifications by 2016 includes 112 000 at Certificate III. To meet the required Certificate III shortfall will require an additional 2.4 per cent increase in delivery at the AQF level each year for the next decade. The sector, therefore, needs to support this modest, but important, increase in delivery at Certificate III while also delivering significantly more qualifications at the diploma level and above.
Due to demographic changes, the skills shortages cannot be met solely by new entrants to training, so deepening Australia's skills base will require a focus on those already in, or marginally attached to, the workforce.
Adult learning and workforce retraining can up-skill and re-skill the current workforce to increase workforce retention rates and boost productivity. The Australian Bureau of Statistics has found that 40 per cent of employed Australians have low literacy levels11.
The Australian vocational education and training system is a shared responsibility between the Australian Government and state and territory governments. Current funding arrangements involve a web of complex planning and accountability arrangements, with insufficient focus on the needs of students and the long‑term outcomes Australia requires.
If Australia is to achieve a vision of having the economy with the most skilled and best trained workforce in the world, it will require a considerable effort by the Commonwealth, states, territories, industry and individuals.
Higher education
Modern societies and economies such as Australia are increasingly reliant on the professional skills and analytical capacities provided by higher education. Returns on higher education to the individual and to the core productivity of the economy are strong. Graduates enjoy better labour market engagement, earn significantly more on average and are able to remain in the workforce longer than those with non‑higher education qualifications or without qualifications12.
OECD statistics suggest that Australia cannot be complacent about the comparative advantage its higher education sector has helped to deliver in terms of high‑quality skills creation and high‑quality research.
The proportion of Australians with higher education qualifications is high (21 per cent of 15-64 year olds) and the proportion of applicants that miss out on a place at university is relatively low (5.8 per cent of eligible applicants in 2008). Despite this, there are known workforce shortages in key occupations requiring university training, including teaching and IT. There are also strong concerns that the number of graduates across the science, engineering and technology fields, which are seen as crucial underpinnings for Australia's current and future prosperity, may not be able to meet future demands (Chart 4).
Information on annual university applications and offers in these fields of education indicates that simply providing more university places may not be sufficient to address our current and long‑term needs. Australia needs a flexible set of higher education institutions with the capacity to anticipate and respond to changes in the market. It also needs a higher education system that can attract students to areas of study identified as critical to our medium‑term and long‑term economic and social needs.
Chart 4 — Eligible applicants for domestic undergraduate courses
in selected fields, 2001 — 2008
Source: DEEWR, 2008, Undergraduate Applications, Offers and Acceptances 2008.
Australia now has a mass system of higher education and, currently, over 41 per cent of Year 12 completers go on directly to university. The Longitudinal Surveys of Australian Youth indicates that 49 per cent of a sample‑age cohort have commenced higher education by age 25, while a further 38 per cent have commenced a VET course. The Higher Education Loans Program (HELP) and other forms of support have contributed to a significant increase in the proportion of Australians able to access higher education; however, there is still significant under‑representation from regional Australians, students from disadvantaged socioeconomic backgrounds and Indigenous Australians (Chart 5).
Chart 5— Higher education participation by equity group compared
to share of total population, Australia 2006
Source: DEEWR Higher Education Student Statistics, 2006.
The benefits of stronger outcomes in early childhood learning and school retention can only be fully realised if our tertiary education sector is equipped to capitalise on the gains achieved in those earlier phases. With the increasing need to upgrade or change skills later in life, universities will need to provide effective learning environments for a diverse student body.
Indigenous education
Closing the gap in educational outcomes between Indigenous and non‑Indigenous Australians is a major challenge facing Australia.
Educational outcomes for Indigenous Australians have been improving, but too slowly, and not at the required levels. There are gaps in attainment of the reading, writing and numeracy benchmarks in Years 3, 5 and 7 between Indigenous and non‑Indigenous children. In 2006, these ranged between 13.3 per cent in the Year 3 reading benchmark and 32.2 per cent in the Year 7 numeracy benchmark. Results for Indigenous students in remote and very remote areas are behind those for Indigenous students in metropolitan areas.
In 2007, the Year 12 apparent retention rate for Indigenous students was 42.9 per cent, compared with 74.3 per cent for all Australian students.
There has been growth in the number of Indigenous students enrolling and participating in early childhood, school and vocational education and training sectors. In 2006 there were 67 841 Indigenous vocational education and training students representing 4 per cent of all VET students, a high proportion of the total enrolment given that Indigenous people comprise 2.5 per cent of the total Australian population. However, many Indigenous students are undertaking lower level qualifications under the AQF. In 1996 only 17.7 per cent of Indigenous students were studying at the AQF Certificate III level or above. In 2006 this figure rose to 28.7 per cent. Completion rates for Indigenous VET students at the AQF Certificate III level and above remained stable over the period 2001‑2005. Although the total number of all Australian students attending university education has grown, Indigenous students remain under‑represented, with little change in the number commencing and completing courses each year (Table 3).
Table 3 — Number of Indigenous students by education sector 1995 to 2006 and indigenous proportion of all students in the sector in 2001 and 2006
| 1995 ,000s |
2001 ,000s |
2002 ,000s |
2003 ,000s |
2004 ,000s |
2005 ,000s |
2006 ,000s |
2001 * | 2006* | |
|---|---|---|---|---|---|---|---|---|---|
| Preschool | 9.9 | 7.4 | 8.7 | 9.1 | 9.1 | 9.0 | 9.3 | 3.7% | 4.4% |
| School | 87.2 | 115.4 | 121.6 | 125.8 | 130.4 | 135.1 | 140.4 | 3.5% | 4.2% |
| VET | 26.1 | 56.1 | 59.7 | 58.0 | 56.6 | 62.7 | 67.8 | 3.3% | 4.1% |
| Higher education | 6.8 | 8.6 | 8.8 | 8.9 | 8.8 | 8.3 | 8.8 | 1.3% | 1.3% |
* As a proportion of all students in the sector
Source: ABS Schools: ABS 4221:0; NCVER VET Provider Data Cubes; DEST Higher Education Student Statistics.
Note: the preschool census does not collect information on all preschool programs.
1 Productivity Commission, 2005, Economic Implications of an Ageing Australia, Productivity Commission-commissioned study.
2 National Research Council and Institute of Medicine. 2000, From Neurons to Neighborhoods: The Science of Early Childhood Development, Washington, D.C.: National Academy Press.
3 National Institute for Early Education Research, 2004, 'The Universal vs. Targeted Debate', in Preschool Policy Matters, Issue 6, April2004.
4 Heckman, James J., 2005, 'Lessons from the Technology of Skill Formation (February2005)', National Bureau of Economic Research Working Paper No. W11142, February2005.
5 McKinsey & Co, 2007, How the world's best-performing school systems come out on top.
6 Rothman, S. and G. McMillan, 2003, Influences on Achievement in Literacy and Numeracy, ACER.
7 Access Economics, 2005, The economic benefit of increased participation in education and training: ABS 2007, Adult Literacy and Life Skills Survey: summary results: 4228.0.
8 ABS, 2008, Australian Schools 2007.
9 Longitudinal Surveys of Australian Youth (LSAY), unpublished work; and ABS Survey of Education and Work (Cat No 6227.0), unpublished data.
10 Shah, C. and Burke, G.,2006, The future labour market and qualifications in Australia, Centre for Economics of Education and Training.
11 Australian Bureau of Statistics, 2006, Adult Literacy and Life Skills Survey, Summary Results, Australia, Cat 4228.0.
12 Borland, J., 2005, 'Transitions to retirement: A Review' Melbourne Institute Working Paper Series, Working Paper No. 3/05.
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