University challenge

Business Higher Education Round Table Summit
Educational Challenges for Future Australia
October 31, 2001

“Education, Education, Education” said Tony Blair, listing his priorities. I make no apology for concentrating on the third of these. Primary education is fundamental, secondary education builds on the secure base that primary education must provide, but tertiary education is my special concern.

I will speak about universities and the challenges facing Australian universities. Let me begin by describing the fundamental aspirations of a modern university. I am bold enough to reduce these to four propositions:

1. The University should be a guardian of intellectual independence and a source of intellectual leadership.

2. Every individual, independent of means, should have access to the richest possible intellectual and cultural environment from which he or she is capable of benefiting.

3. The University should provide for the human and infrastructural needs of business, industry and the professions.

4. The University should lead in productive innovation in science, technology and the arts.


For me this is a non-negotiable package. All four components must be present and all four must be in balance. They will, of course, come into conflict with one another from time to time. External constraints will buckle and distort. Such are the challenges of higher education policy.

Let me say something about each of these. I will use reverse order to emphasise the interdependence of the propositions.


The University should lead in productive innovation in science, technology and the arts.’
Australia has a small population and limited internal markets. Measured by publications, we produce about 2% to 3% of the world’s research. How do we enter the new economy? Can we achieve global significance?

That is, I believe, the wrong question. Of course most of the technology we use will have been invented overseas but we cannot be passive onlookers, single-minded consumers. Apart from the need to create new opportunities for business and industry and to adapt innovation from elsewhere to service our own needs, we must pay for a seat at the table of international intellectual commerce.

That constitutes an argument for investing in Australian innovation and in our own R&D, but where do universities come in? Is it obvious that Universities have a key role? Try the United States experience. Data from 1997 reproduced in the New York Times shows that for citations in US industrial patents, 52% come from academic institutions, 10% from other non-profits and 11% from government laboratories.

Universities in the US are different you may say – and that is unquestionably true. Nevertheless we were told recently at the inaugural Ericsson innovation dinner in Canberra that Stanford received 90% of its research funding from government. That is the private university whose presence and intellectual firepower created Silicon Valley.

Universities are essential engines of growth in the new economy.

Naturally we need entrepreneurial business just as we need creative universities and we should work hard to forge partnerships. The old way was to commission universities to carry out research or, taking the other perspective, for universities to seek industry funding to support their research activities.

Sir Alec Broers, Vice-Chancellor of Cambridge, was describing to me recently his university’s current approach. This is to find industry partners willing to co-locate and explore productive R&D together.

It can, of course, be argued that the seeds of this lay in the German Frauenhofer institutes and that our own CRC program is based on a similar philosophy. But these are more project specific. The Cambridge model, as I understand it, puts together a likely couple in confident expectation of future outcomes.

None of this is of any significance without investments, and the harsh reality is that spending on Australian R&D is way below OECD norms and the gap is widening. A sober calculation by the Go8 identifies a need for an additional investment of approximately $14 billion over the next five years. Roughly half of that would be required from the Commonwealth government.

Let me quote some figures for 1999-2000. Research and Development spending in Australia was 1.43% of GDP. In Finland it was 2.92% and South Korea 2.89%. In both cases more than twice as much as ours.

Mind the gap – the gap is widening!

The effects of this are seen most clearly in areas where time from discovery to market is shortest. Ireland’s per capita production of infotech products is about 25 times that of Australia. We languish almost at the bottom of the OECD, barely nudging out Greece and Spain.

Sharp tongues say that Irish computer scientists would be telling Australian jokes if only we were internationally relevant.

Our overall investment is woeful, yet we have spikes of excellence. I am happy to give you the news that one of the most prestigious prizes for information and communications technology has been won by an Australian. Professor Allan Snyder, who holds a joint appointment at the University of Sydney and the ANU, will share the 2001 Marconi International Prize with Bell Laboratory’s pioneering optical physicist, Dr Herwig Kogelnik. Previous winners include the former MIT President, James R Killian and the Nobel Prize laureate, Arthur Schawlow. Allan is Director of The Centre for the Mind, which is a joint venture of our two universities, and he is currently devising technological tools for enhancing creative thinking.

Australian universities can lead at the very highest level of creative innovation yet I was challenged last week to justify my outrageous ambition of setting the OECD average as a goal for our country.


I am still talking about my fourth proposition – productive innovation in science, technology and the arts. There are always people who will claim that universities stifle both creativity and practicality. Yet Romaldo Giurgola, designer of Parliament House, has spent a lifetime working as a university academic and accomplishing much else besides.

If universities can provide freedom and space then productive innovation will follow.

Proposition 3 concerns the human and infrastructural needs of business, industry and the professions. Universities have always been training schools in some measure. There is nothing wrong with developing highest competencies. We prefer engineers whose bridges do not fall down, surgeons whose scalpels do not slip and auditors who can read balance sheets.

It is also true that there is a danger that abstraction confers status. Think back to ancient Chinese officials with improbably long fingernails, demonstrating that menial tasks were beneath their dignity. On the other hand true value adding in universities comes when we develop higher skills – adaptability, the capacity to think independently, to acquire information rather than absorb it, the ability to cope with a working life of constant change. There is a creative tension here in which universities must be responsive to the needs of employers and employers must see beyond the ends of their noses.

It is important that an engineer develops soft human skills. It is wasteful to train people to use obsolescent equipment or equip them with a skill set which cannot endure. It is, of course, more costly and takes longer to cultivate questioning minds with a potential for self-directed future development. Nevertheless, it is essential that there be continuing high-level dialogue between business and higher education. Unfortunately many fail the test of prioritizing their own time to contribute to our Round Table.

In many areas where the country needs more graduates, e.g. science, engineering, nursing, we have a shortage of students because the initial costs to the individual do not match the perceived professional rewards. In others we have a shortage of staff, e.g. information technology, marketing, finance, because the emerging graduate can earn more than the mature senior lecturer. We are also in danger of undervaluing liberal studies, not only as a profound civilizing influence on society, but also as a serious preparation for true productivity in the workforce.

Let me consider Proposition 2. ‘Every individual, independent of means, should have access to the richest possible intellectual and cultural environment from which he or she is capable of benefiting’. This is not merely an affirmation of human rights and a call for equity. It is also a practical call that we mobilize the human talent available to our country a

The HECS scheme, insofar as it provides loans later to be recovered from earnings through the tax system, is a marvelous invention but its form is by no means perfect. In the first place it is a severe temptation to governments to cut investment and replace the gap by hiking student contributions. Secondly, the apparent logic of relating charges to the cost of provision of courses can drive students away from programs where national need is greatest. In the third place there is a missed opportunity inherent in having a low threshold for repayments. Even a dry market economist should see that sensitive tuning of repayments to actual earnings achieves not only equity but an automatic relationship to national priorities. If social workers earn less and never repay the full amount how does the country lose if others return in full reserve according to their material success? I believe that we should recognize that higher education is a fundamental public good for which society should pay, but that this payment should take account of personal benefit. The latter can be measured at least in part through subsequent earnings.

I advocate a thoroughgoing review of fees and charges. In particular, up-front means testing is fraught with problems and the HECS system offers scope for post-hoc adjustments.

Let me turn to Proposition 1. ‘Every civilized society needs to pay for vigorous independent institutions of higher learning’. There is an obvious tension between product innovation involving commercial engagement and the important role of a university in providing fearless critiques of society and its trends. If universities are over dependent on commercial relationships their independence is compromised. If academics have no time for reflection, no opportunity to distance themselves, from time to time, from direct engagement with the hurly burly of commercial reality, then society is ultimately poorer.

Spare a thought for the academic managers. They run institutions which should be full of free spirits but which have the dimensions of significant corporations. Spare a thought for the politicians and their central bureaucrats. They must ensure accountability and value for public money. However, the most efficient way to operate is to give universities that freedom which encourages responsibility. If universities are micro-managed from outside, then the result is a spineless response of learned helplessness.

Everyone must resist short-term solutions which damage the fabric. When times are tight it is no solution to close departments of medieval Latin poetry, abandon library collections in philosophy and force one’s scientists to work in marginal fields which need no internationally competitive equipment or infrastructure.

All international comparisons show that our leading universities are now dramatically under funded. Many groups agree that around $1billion per annum is needed to bring us up to scratch. We can argue that this is securing an important and viable export industry but it is much more than that. It is necessary to accept some seeming inefficiencies in the interest of fundamental independence of spirit.

The biggest danger is a bizarre vicious cycle within which cuts produce problems. Problems are identified, deficiencies publicized and blame flies around. Quality assurance and regulations of various kinds are imposed. Core resources are diverted to inspectorial activity so the cuts become worse and so do the outcomes.

We must break out of this downward spiral and make much needed forward investment in a timely way. Let me paraphrase Tony Blair in order to set my priorities for the first necessary remedy:

“Money, Money, Money”.