Something important is happening in Australia.

Briefly: a right-wing coalition took power in Australia a few months ago.  Said coalition created a “commission of audit” to look over public finances, and recommend “economies”; unsurprisingly, it came back with recommendations much like the ones the Commission on the Reform of Ontario Public Services would have, if Don Drummond, instead of being a mild, respected former public servant, had been an Orc with especially low blood-sugar.  Among the recommendations: large cuts in government operating and research grants, complete de-regulation of tuition fees, and making the country’s famous HECS student aid scheme significantly less generous by charging real interest, and lowering the repayment threshold – currently at a rather amazing A$51,000 (also, $51,000 Canadian – we’re at par) – to $32,354.

Then, last week, the federal Treasurer Joe Hockey (yes, really) announced his budget.  Sure enough, there were cuts to both operating grants and research council funding (roughly 20%). Tuition was indeed fully deregulated – a world first.  The HECS repayment threshold will fall only $500 or so, but interest rates are now equal to the government rate of borrowing, not inflation.

So, what does all this mean?  Hard to say just yet.  The HECS changes at least could be held up in the Senate, where the government lacks a majority, but much of the rest will go through as a supply motion.  If they do go through as planned, the likely results are as follows:

1)      Higher fees.  Education Minister Christopher Pyne claimed that competition might actually drive fees down, a statement so stupid that sheep could outwit it.  Nowhere in the world, ever, has deregulation of fees resulted in anything other than a very quick one-time rise.  How much higher?  Hard to tell.  Full deregulation has simply never been tried before.  But the best guess is that they will rise to roughly where international fees are – that is, somewhere between a doubling and a tripling.

2)      A small enrolment reaction: If results in England are anything to go by, the short-term effects on enrolment of deregulation could be small.  But then again, that assumes the tuition rise won’t be vastly more than what happened in England.

3)      A rise in institutional income.  In England, the near-tripling of fees slightly more than made up for the 40% cut in operating grants.  Here, the cut in operating grants is smaller, and the fee hike is potentially of the same size (though, again, who really knows?).

Those are the first-order reactions.  Where it gets more complicated is the potentially huge distributional effects among institutions, and the locking-in of prestige by top universities that are able to charge significantly more than others.  That’s why Australian Higher Education guru Simon Marginson referred to this plan as Christopher Pyne’s coming-out party as Shiva the Destroyer.  This is as big and unpredictable a reform as has ever been attempted in higher education, and while some reasonable guesses can be made (Gavin Moodie’s, here), they’re just that: guesses.

We could view all of this as just some kind of bizarre antipodean curiosity were it not for the fact that Australia is often in the vanguard of higher education policy innovation (income-contingency and internationalization, to name but two such areas).  It’s an experiment everyone should watch carefully.