Australia’s government has washed its hands of responsibility for universities’ research infrastructure, forcing them into a perilous dependence on international tuition fees, according to a leading investment banker.
Phil Clark censured the country’s government for a hands-off approach that forces universities to take an “enormous risk” on a volatile funding source.
“If you’re relying on an unpredictable cash inflow to fund a very predictable cash outflow – which is what research infrastructure is – you’re not doing it right,” Mr Clark told the Australian Financial Review Higher Education Summit in Melbourne.
“They’ve really got to ask themselves: ‘Don’t we, the government, have a role in promoting and fostering transformative infrastructure?’ The answer is, ‘yes they do.’”
A lawyer who sits on multiple corporate boards, Mr Clark has also led state and federal government education reviews and advisory bodies. He chaired the group that awarded grants from the , a government money pot that bankrolled scores of large research and teaching infrastructure projects during the global recession.
The EIF is now in effect defunct, with the government trying to redirect its remaining A$3.8?billion (?2.1?billion) into a disability insurance scheme – a move that has so far been blocked by the Senate.
Mr Clark said that teaching infrastructure did not require government investment, because “you can get it funded”, but research facilities warranted a different approach.
“Research infrastructure is an area of market failure. Even though it produces fantastic returns, the market’s not going to fund it. Where there’s market failure, government has responsibility,” he?said.
He said that universities were taking an acceptable risk in using tuition revenue to cross-subsidise research, but not research infrastructure. “You cannot just turn off the infrastructure tap,” he said.
“It’s a matter of risk. Something could go wrong if there’s turmoil in the currency markets [or] the Chinese government decides they don’t want their students coming here. There’s an enormous risk there, and I’ve been having discussions with the government about how they can get a sensible institutional research infrastructure programme in place.”
He said that Canberra should “put up some money and leave it to the experts instead of trying to do it themselves. The only way you can rely on government long term is get the money in a fund, with an army of angels around it who stop them taking it away.”
The A$4?billion allocated from the EIF promoted A$11.6?billion worth of infrastructure because of co-contributions from other investors, he said. “We had people from all over the world coming and looking at what the EIF was doing and saying, ‘What a fantastic idea.’”
Mr Clark added that universities were wary of seeking funding through capital markets because of “the uncertainty that this government’s done an absolutely magnificent job of creating”. He said that if he sat on a university board, he would be cautious about “gearing up” for the same reason.
But he criticised universities for overlooking a less precarious source of funds – securitised real estate, where institutions rent facilities from investors. “A very high proportion of office space, large industrial space and shopping centres in Australia is securitised,” he told the summit.
“Universities want to be owners, not renters. My answer to that is, ‘Get over it, guys.’ It’s good enough for the government to be a renter. It’s good enough for all the big corporates in Australia. What’s so magic about the university sector?”
