Productivity Commission releases Skills and Workforce Development Agreement report

The Australian Government’s Productivity Commission has released its final report on the national Skills and Workforce Agreement (NASWD). The Commission’s media release reads:

“Governments have stepped back from some of the NASWD’s policy aspirations. Targets have not been met and the performance framework has not held governments to account,” Commissioner Jonathan Coppel said.

“The guiding principle for the review is to strengthen the focus of the VET system on meeting the needs of its users — students and employers,” Commissioner Coppel added.

The Commission recommends changes to make the next intergovernmental agreement more effective and improve accountability for the $6.4 billion spent each year by governments.

“There are reforms which should improve the returns from the large public investment in VET,” Commissioner Malcolm Roberts said.

“Almost half of government funding is distributed as subsidies to training providers. These subsidies should be based on the efficient costs of delivering courses. Having hundreds of different subsidy rates is confusing and ineffective; subsidy rates should be simplified,” he added.

Income contingent loans make it possible for students to take university and higher VET courses. More courses, including Certificate IV courses, should be eligible for loans, with the emphasis on courses which deliver genuine results for students.

Too many VET students do not complete their courses. Governments can support students — especially apprentices — to complete their training through better matching of students and courses, more support during training and timely employer incentives.

VET helps many people who lack essential language, literacy, numeracy and digital skills. Two to three million Australians have one or more of these skills below the level usually achieved by Year 8. A broad strategy involving schools, VET and adult education providers is needed to tackle this significant problem.

CCA Comment

“The Commission’s massive report (full version 322 pages, Overview 55 pages) compiles an impressive amount of information. Of the Report’s many recommendations, CCA is most pleased to note the strong proposed Commonwealth commitment to foundation skills and the recognition of the special needs of Indigenous Australians,” said CCA CEO, Dr Don Perlgut.

“However, we are greatly concerned that the Report’s principles include ‘contestability in VET markets, with a provider agnostic approach to training delivery’ (principle number eight below). Numerous submissions to the Commission’s Interim Report in July detailed why ‘contestability’ – read ‘marketisation’ or ‘privatisation’ – as an underlying principle was outdated and misguided. Last July, CCA and others summarised the evidence that ‘marketisation’ of Australian VET has not resulted in increased equity or learning quality, and in many cases has done just the opposite. The Commission simply ignored those submissions,” said Dr Perlgut.

Foundation Skills

The Productivity Report examined Foundation Skills in detail and found (p. 28):

“For many Australians, their participation in society and the economy is limited by poor ‘foundation skills’ — language, literacy, numeracy and digital literacy (LLND) skills.”

Two to three million Australians lack “the literacy and numeracy skills for the basic needs of modern life. Eighty per cent of people with below level 2 standards in literacy … came from a household where English is spoken at home. About 500,000 (20%) came from households where English was not spoken.”

“People lacking LLND skills are less likely to be employed and, if employed, are more likely to be in jobs with lower wages. Studies have also shown that LLND skills are important for civic participation.

The report proposes a “national LLND skills strategy” that will:

“bring together measures to improve school education, ‘second-chance’ learning in the VET sector and the other adult education services delivered by public and private providers. It should … be coordinated across the Australian, State and Territory governments, given they are all involved in service provision and funding. The strategy would sit above the NASWD and other education‑related agreements, which would house the details of how the national strategy would be delivered in specific sectors.” (p. 29)

Foundation skills delivery to “people not in the labour market, with poor experiences at school, who are homeless or facing other challenges will need well‑designed outreach.” (p. 30)

Review Summary

  • This review has not found evidence of a vocational education and training (VET) system in crisis. Our recommendations address some of the system’s acknowledged weaknesses and should build on its strengths to lift participation and improve the quality of training.
  • The National Agreement for Skills and Workforce Development is overdue for replacement.
  • Governments have stepped back from some of its policy aspirations. Targets have not been met and the performance framework has not held governments to account.
  • A new intergovernmental agreement should be principles‑based, modular (to retain flexibility and currency) and reviewed every five years.
  • Australian Government funding should remain largely untied for base funding but subject to much greater accountability and transparency.
  • Governments should continue to support the development of a more efficient and competitive VET market through informed user choice and a focus on quality.
  • Students need better curated information on career opportunities, the performance of training providers, course quality and prices.
  • Efforts to improve quality should be ramped up through faster changes to training packages, developing an evidence‑based VET workforce strategy, and a phased introduction of independent assessment.
  • There is a manifest capacity for governments to achieve a better return on the $6.4 billion spent on VET by:
  • using the efficient costs and loadings currently being estimated by the National Skills Commission as a common basis for setting and simplifying course subsidies
  • introducing modest minimum student fees for Certificate III and above courses with exemptions for disadvantaged students
  • applying more contestability and transparency to public funding of TAFEs and enhancing the operational autonomy of public providers
  • enabling State and Territory funding to follow students enrolled with an interstate provider.
  • To scale up workforce skills, governments should expand VET Student Loans (VSL) to more Diploma and above courses and to most Certificate IV courses.
  • Loan caps should better reflect course costs, and loan fees should be paid by all students.
  • Reforms to the trade apprenticeship system are best focused on:
  • improving completion rates by better screening and matching of prospective apprentices
  • making pathways more flexible and providing the same subsidy for non‑apprenticeship pathways as for traditional pathways
  • adjusting the timing of employer incentives to provide more support when the risk of cancellation is greatest.
  • There should be a coordinated national strategy to improve school education, ‘second-chance’ learning in the VET sector and other adult education services to reduce the large number of Australians with low language, literacy, numeracy and digital literacy skills.
  • To address some of the key obstacles to lifelong learning, this report proposes improvements in foundation skills, better credit pathways, an expansion of VET Student Loans (VSL) and a trial of a new financing instrument for mature‑age Australians reskilling and upskilling.

Agreement Principles

For the national agreement, the Commission has identified 11 principles to guide governments’ VET reform agenda (p. 11, NAWSD Review Overview):

  1. centring policy on the users — students and employers — with a focus on informed choice, quality safeguards and measured outcomes;
  2. accessibility, with a focus on meeting the needs of diverse user cohorts;
  3. continuous improvement in VET quality;
  4. fiscal sustainability and stability of funding;
  5. transparency and accountability about VET investment and outcomes;
  6. efficient pricing and delivery of quality training at least cost;
  7. designing incentives to increase participation in VET commensurate with the benefits;
  8. contestability in VET markets, with a provider‑agnostic approach to training delivery;
  9. alignment with other parts of the education system, so that the treatment of VET and higher education for similar training does not distort student incentives;
  10. evidence‑based policy, informed by quality data and evaluation; and
  11. responsiveness to the changing needs of users and the economy.
Performance Against NASWD Performance Agenda

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