An Analysis of the Rising Cost of Education in Australia(extract)

An Analysis of the Rising Cost of Education in Australia
(extract)
Abstract
Human capital, or a better educated labour force, is a major determinant of economic growth and productivity. However, recent trends in the cost of education in Australia may cause growth and productivity to suffer. For example, during the period 1982-2003 inflation rose on average by 4.4 per cent per annum, whereas the cost of education grew overall on average by 7.8 per cent. This has made education a relatively expensive item among Australian households. This paper compares and contrasts the cost of education in Australia and comparable economies with the cost of other goods and services embedded in the CPI(Consumer Price Index)basket using the latest available quarterly data. Finally, the major determinants of the rising cost of education in Australia are examined. It is found, inter alia, that over the period 1986-2003 the increasing number of students enrolled at non-governmental primary and secondary schools and the introduction of the Higher Education Contribution Scheme(HECS)were major influences on the rising cost of education, explaining some 98 per cent of variation in the cost of education in Australia over time.

1. Introduction
   There is a consensus among economists that human capital plays a substantial role in achieving higher economic growth and increased labour productivity. New growth theories identify the channels through which economic growth occurs and how reform processes can stimulate the rate of investment in physical capital, human capital, technological know-how and knowledge capital. Together these factors exert a sustained and positive effect on the long-run growth of the economy (Rebelo,1991).For instance, in their seminal work Barro(1991)and Barro and Lee(1994)echoed the importance of human capital(or a better educated labour force)as a major determinant of economic growth and productivity. More recently, Valadkhani (2003)found, inter alia, that long- term policies aimed at accelerating the various types of investment in human capital will also improve labour productivity. As higher productivity translates directly into higher per capita income, Australians, as a whole, benefit from higher standards of health care, education and public welfare. Very recently, Chou(2003,p397)found that“42 per cent of Australian growth between 1960 and 2000 is attributable to the rise in educational attainment”. Therefore, it is important to monitor the cost and affordability of education through time. However, compared with the price of most other goods and services,