FINANCING EDUCATION

This section provides an overview of the source and application of funds in the delivery of education and training in Australia. As most of these funds can ultimately be traced back to initial government outlays, most of the tables relate to Government Finance Statistics (GFS). GFS data are compiled in accordance with the International Monetary Fund's Government Finance Statistics Manual 2001. GFS education data, relates to the activities of the Commonwealth and the state and territory governments and for the purposes of the data presented here, represents the general government sector only.

While the GFS are important, a wider presentation using national accounting data is also important. It can be considered that the data presented on education expenditures is akin to the national accounting concepts of gross national expenditure and gross domestic product (GDP), but with a focus on education, not the whole economy. National accounting data are compiled in accordance with the United Nations' System of National Accounts (SNA). Within the national accounting framework, the household sector includes both individuals and private non-profit institutions serving households (e.g. non-government schools).

Data for individual time periods is expressed 'in current prices', i.e. in terms of prices at a given time. Consequently, changes over time may be affected by price changes.


Education expenses

Final expenditure on education

Table 12.32 provides key data for 'final' education expenditure, sourced from the Australian System of National Accounts. Overall, national education expenditure increased over the period 2001-02 to 2005-06 by 39%, from $42 billion (b) to $59b; as a proportion of Australia's GDP, this represents an increase from 5.8% to 6.1% of GDP over the period.

While government final consumption expenditure increased by 39% ($9,775 million (m)) from 2001-02 to 2005-06, household final consumption expenditure on education services increased by 44% ($5,649m) over the same period. Estimates of household final consumption expenditure on education cover the actual expenditures of households plus any expenses of private non-profit education institutions that have been funded by government.

Private expenditure on education consists of household final consumption expenditure for the purpose of education services plus gross fixed capital formation by private sector units classified to the education industry (e.g. the value of work done on new building works of non-government educational institutions). Over the period 2001-02 to 2005-06, private gross fixed capital formation increased by 31% to $2,140m, while for general government capital formation, the increase was 22% to $3,337m.

12.32 FINAL EXPENDITURE ON EDUCATION
			2001-02	2002-03	2003-04	2004-05	2005-06
Final consumption expenditure
	General government	$m	25 099	27 232	28 779	31 584	34 874
	Households(a)	$m	12 968	14 140	15 678	17 058	18 617
	Total	$m	38 067	41 372	44 457	48 642	53 491
Gross fixed capital formation
	General government	$m	2 726	2 766	2 755	3 080	3 337
	Private	$m	1 638	1 856	2 042	2 064	2 140
	Total	$m	4 364	4 622	4 797	5 144	5 477
National education expenditure		$m	42 431	45 994	49 254	53 786	58 968
Gross domestic product (GDP)		$m	735 714	781 675	840 285	896 568	965 969
National education expenditure as a proportion of GDP		%	5.8	5.9	5.9	6.0	6.1
(a) Includes private non-profit instititutions serving households (i.e. private schools).
Source: Australian System of National Accounts (5204.0).

Australia has been increasing its participation in a global market for education services. By 2005-06, education exports, as measured by fees paid by international students to Australian education institutions, totalled $3,981m. Approximately $6,000m was spent in Australia by these students, on associated living expenses (including food, accommodation and transportation). Education imports include Australians studying abroad and other payments overseas for education services (consultancy, correspondence courses, etc.). Combined with associated living expenses, education imports accounted for $830m in 2005-06.

General government expenses

Operating expenses for all levels of government are shown by economic transaction in graph 12.33 and by purpose in table 12.34. In 2005-06, employee expenses of $27,383m comprised 55% of all operating expenses on education.

Table 12.34 shows that total operating expenses (less intra-sector transfers) across all levels of government in 2005-06 was $49,741m, an increase of $3,133m (7%) from the previous year. This largely reflects increases in expenses on primary and secondary education of $1,734m (7%) and tertiary education of $1,401m (8%).

In 2005-06, over half (55%) of the operating expenses on education across all levels of government ($27,477m) was spent on primary and secondary education. Operating expenses on the tertiary sector totalled $18,415m, which includes $13,685m on university education and $4,703m on other tertiary education (including TAFE).

Over the four-year period from 2001-02 and 2005-06, operating expenses for education increased by 31% across all levels of government, with increases of 31% for primary and secondary education, and 29% for tertiary education.

12.34 GOVERNMENT OPERATING EXPENSES ON EDUCATION(a), By purpose
		2001-02	2002-03	2003-04	2004-05	2005-06
		$m	$m	$m	$m	$m
Primary and secondary education		21 013	22 482	23 798	25 743	27 477
Tertiary education
	University education	9 946	10 885	11 688	12 434	13 685
	Technical and Further Education	4 267	4 181	4 270	4 545	4 703
	Tertiary education n.e.c.	22	31	31	34	27
	Total	14 234	15 097	15 989	17 014	18 415
Preschool and education not definable by level		1 352	1 609	1 813	2 018	2 149
Transportation of students		940	868	900	1 074	1 061
Education n.e.c.		572	711	709	759	639
Total		38 110	40 767	43 208	46 608	49 741
(a) All levels of government.
Source: Government Finance Statistics, Education, Australia (5518.0.55.001).

Graph 12.35 summarises operating expenses for education for each level of government. In 2005-06, operating expenses for education were $15,807m for the Commonwealth Government, $35,469m for state and local governments and $13,870m for the multi-jurisdictional sector (mainly public universities). Intra-sector transfers that occurred between different levels of government for the purposes of education, were $15,405m, resulting in total government operating expenses of $49,741m.

Operating expenses for education for state and local governments have remained higher than for the Commonwealth Government over the period from 1999-2000 to 2005-06. Over this period, operating expenses for education have increased by similar amounts for both state and local government (51%) and the Commonwealth Government (52%).

Funding education

Funds to support educational facilities and the delivery of education services, originate from a variety of sources, predominately grants from the Australian (Commonwealth) Government, and state and territory governments. Sales of goods and services include fees and charges for tuition, which vary considerably within the education sector. To a lesser extent, other sources of funds may include items such as donations or return from investments.

While primary and secondary education is free in government schools in all states and territories, fees may be charged for the hire of text books and other school equipment (particularly in secondary schools). Voluntary contributions may also be sought from parents. Most non-government schools charge fees, although these may vary from school to school. Tuition fees are set in consideration of the school philosophy and affiliation, level of government funding received, and the educational services and facilities provided. Additional fees may be charged for textbooks, subject materials and extra-curricular activities.

Most VET providers charge students fees for the administration of VET courses, for tuition, materials or for student amenities. These fees vary according to the type of course and its duration. Higher education institutions receive revenue from students who are required to contribute to the cost of their education through the Higher Education Loan Programme, and from other fee-paying students including overseas students.

Fees are usually charged for ACE programs that complement the formal programs and qualification pathways provided by the schools, VET and higher education sectors. Fees vary considerably between ACE programs, being determined by the diverse range of ACE providers including community-based organisations and educational institutions.

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