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The Demand Driven University System: A Mixed Report Card - Productivity Commission Research Paper – June 2019

This paper presents a summary of some of the outcomes of this report.

The broad benefits of tertiary study and the difficulties students (particularly from less well-off families) face in funding their education have long been recognised as justifying a government role in funding and provision of tertiary education.

The introduction of the demand driven system was the most fundamental change in the Australian higher education system in two decades. Beginning with a step up in government-funded places in 2010 and 2011, from 2012 the demand driven system saw the government extend financial support — in the form of partial payment of course costs and income contingent loans to meet the remainder — to every domestic undergraduate student that universities chose to enrol.

The demand driven system ceased at the end of 2017. The Australian Government has limited funding for 2018 and 2019 to the 2017 level. From 2020, the Australian Government intends to link future growth in nominal funding to performance targets for individual universities, with a maximum rate in line with growth in the 15-64 year old population.

The demand driven system saw university access expand substantially. The number of domestic bachelor degree students rose from 577 000 in 2009 to 769 000 in 2017. Improved equity of access was an important goal of the demand driven system.

The review, undertaken in 2014 by David Kemp and Andrew Norton (2014), found that the Demand Driven system had allowed a substantial increase in the number of students, including those from equity groups. On the other hand, they found that more students were entering poorly prepared and at considerable risk of not completing their courses, and that attrition rates were high for students entering with low ATARs.

There are now some indications that the rising complexity of entry pathways to universities, Vocational Education and skilled employment means that prospective students face increasing difficulties in understanding the full range of study options and opportunities available to them.

Comparisons across matched groups of University students and VET students shows that, at age 25 years, a higher proportion of VET students were working full time and on average they earned more than their matched counterparts that attended university, with these gaps growing between 2013 and 2016.


Outcomes Measure











 Full-time work






 Part-time work












 Manager or professional






 Technical or trade work






 Average weekly earnings







The demand driven system saw an influx of additional students to universities who would not have had the opportunity to study in previous periods.  Nevertheless, a smaller proportion of additional students are completing university, and those who drop out face poorer outcomes than other students across multiple dimensions of job quality (satisfaction, career prospects and utilisation of skills).  Measures to reduce these poor outcomes should include more guidance prior to university entry about whether the university system is a sensible destination for the person, improvement in pre-university foundational skills, and early support for students struggling with their university study.