Farrago talks higher ed: the Demand Driven System

Monday, 12 May, 2014


Words by Martin Ditmann


Australian universities can take in as many students as they want now, according to something called the ‘demand driven system’.

But it hasn’t always been like that.

What is ‘demand driven’ funding?

The government used to only give universities money for a certain number of bachelor-degree students.

A university may have wanted more students, but it wouldn’t get more money for them.

The University of Melbourne, for example, could have had 100,000 or 60,000 students, but would receive exactly the same amount of money from the government.

In 2012, the government switched to a ‘demand driven’ funding system. That meant it would give universities money based on how many students they had.

So if a university doubled its number of students, it would get about double the funding from the government.

Medicine and postgraduate courses are an exception. The government still sets the amount of students that a university can take in for those courses.

The government also abolished something called the ‘Student Learning Entitlement’. That meant that new Australian students wouldn’t stop getting government fee support if they spent a long time at university.


The government says the system allows universities to take in more students. It says Australia’s economy needs more people with university degrees.

By 2025, it wants 40 per cent of 25 to 34 year olds to have Bachelor degrees.

The government also says a demand driven system increases competition. It says universities have to compete with each other more to get students—that’ll mean more pressure on unis to perform well to attract more students.

The University of Melbourne is in favour of the demand driven system. It says it’s “most welcome”.

Demand driven supporters say it’ll mean better universities and more students.


Some organisations oppose the demand driven system or worry about it.

The National Tertiary Education Union (the NTEU) supports demand driven funding. It worries, however, that the system will encourage something other than better performance among universities students. It believes universities might spend more on “superficial” advertising to get students.

The National Union of Students (NUS) also has concerns. In 2013, then-NUS President Jade Tyrrell said the NUS had warmed somewhat to a demand driven system. However she worried that universities would enrol too many students into certain courses. She said graduates of those courses could later overcrowd certain industries—making it harder for graduates to get a job.

She also said it might mean too few students studying other courses, leading to a shortage in some industries.

Others, including education spokespeople on both sides of politics, worry about “quality”. Education Minister Christopher Pyne worries the system could put “quantity” of students before “quality”. He’s worried about the “reputation” of degrees dropping – again making it harder for students to get a job.

So, demand driven sceptics say too many students might go to uni in general, and too many might learn certain subjects.

The Kemp-Norton review

When he became minister, Christopher Pyne commissioned a review into the demand driven system. Former Liberal minister David Kemp and university adviser Andrew Norton wrote it and released it this year.

The Kemp-Norton review is in favour of the demand driven system and wants it to go further.

The review says the system should also apply to private colleges. It says that will give students even more choice of higher education institutions.

It wants the government to scrap some of its student targets (like the 40 per cent by 2025 one).

It is concerned the demand driven system might lead to more university students—and more cost to the government in university loans. The review recommends the government considers making students pay a university loan fee and pay back their university loans earlier.

Left wing groups, such as the Greens and Labor, have criticised some of the review’s ideas. They say more money for private colleges will mean less money for students at public universities (like Melbourne). And they’re worried about students having to pay more for university.


Demand driven funding proponents say students will get better unis and more chances to go to university. Sceptics say it may lead to more students struggling to find a job.

Extending the demand driven system could mean even more student choice. But it could also mean higher fees and less funding for many students.