The Australian Productivity Commission Review: Our VET Sector Needs Reform

Claudia Reiners
March 4, 2021

The Australian Productivity Commission Review: Our VET Sector Needs Reform

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After years of underperformance, the Australian Productivity Commission has set their sights on reform to our multi-billion dollar vocational education and training (VET) sector.

In their latest Skills and Workforce Development Agreement Review, the Commission addresses concerns on declining VET enrolment and completion rates, and the subsequent impacts this has on our workforce’s skills capacity. 

The Commission advocates for an overhaul of the skills-funding agreement between the Commonwealth, State and Territory governments, with improvements across the board – apprenticeship programs, student choice, government funding, and more. The proposal will develop a more effective and competitive VET sector capable of building resilient, future-forward workers.

Here are our key takeaways from the report:

  • More transparency and regulation will be applied to government funding and course subsidies.
  • The VET student loans program will be expanded to include Certificate IV qualifications.
  • A central information hub will be established to facilitate better student choice.
  • There will be reforms made to the trade apprenticeship system.

A review of the 2012 NASWD

As one of Australia’s education pillars, the VET system services millions of students each year. Therefore, delivering high-quality education and training that produces job-ready graduates is a must.

The National Agreement for Skills and Workforce Development (NASWD) was established to guide the Australian, State and Territory governments in the improved delivery of VET services. This agreement was a commitment to a long-term skills reform to support workers in developing the skills they need to effectively participate in our job markets. 

Although the NASWD set national targets to be achieved by 2020, Australian Productivity Commissioner Jonathan Coppel says these targets have not been met. 

“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,” says Coppel.

The Commission has proposed a stronger intergovernmental strategy to ensure equal responsibility from all parties in meeting the new NASWD targets, thereby lifting performance.

The new skills proposal follows the same guiding principle as the 2012 agreement  – to bolster the skills of our workforce and increase employment opportunities for all working-age Australians.

1. Addressing the transparency and accountability of funding

Approximately $6.4 billion of government funding is spent on the VET sector each year. Yet, the returns on this have been underwhelming. 

Commissioner Malcolm Roberts calls for regulations to all funding, to monitor and improve the returns of the taxpayer dollars. All governments must show stronger accountability and transparency when spending public funds. 

According to the report, 50% of government funding is allocated towards subsidies to training providers. However, these subsidies are not regulated by the Australian Government and are instead assessed on a case-by-case system. 

“Subsidies should be based on the efficient costs of delivering courses. Having hundreds of different subsidy rates [across our states and territories] is confusing and ineffective… Subsidy rates should be simplified,” says Roberts.

The improved regulation of government funding will be achieved through:

  • A standardisation of course subsidies set by the National Skills Commission and agreed by all governments.
  • A commitment to data sharing and collection from all governments. The National Centre for Vocational Education Research (NCVER) will act as a central collection body and publish information pertaining to the attribution of funding to course subsidies, capital expenditure and community service.
  • The use of data analytics to evaluate VET outcomes and return on investments across individual states and territories.

Registered training organisations (RTOs) and TAFEs will be impacted if this recommendation is accepted by all governments. All training providers will receive an equal distribution of public funds and be required to submit financial data to the NCVER.

On the flip side, there is an opportunity for providers to receive more funds to bolster their capacity to educate and train more workers.

2. Expanding participation in VET through more student loans

We have witnessed a steady decline in the enrolment rates of VET programs in recent years. To encourage more working-age Australians to undertake study, the Commission recommends extending the VET Student Loans (VSL) program to more courses. The expansion of the VSL program ensures workers are continually refreshing and improving their skill sets to meet the evolving demands of the industry. 

The Commission has broken down this recommendation into three actions:

  • All governments will make loans available to a wider range of students, particularly those completing Certificate IV courses.
  • The Australian Government, in consultation with State and Territory governments, will replace the existing VSL course eligibility criteria with a ‘blacklist’ of ineligible Diploma and above courses. The blacklist will comprise only of courses that are leisure-related courses or courses with poor employment outcomes.
  • The Australian Government will extend the VSL ‘loan caps’ to incorporate more courses.

With more student loans made available, we expect to see a spike in enrolment enquiries and student intake for applicable courses.

Providers should closely monitor the expansion of loan caps into applicable courses they offer and take advantage of this by boosting student acquisition efforts.

Contact us today to learn more about attracting high-intent prospective students.

3. Establishing a central information hub for prospective students.

The review has found that subpar user choice has led to low enrolment and completion rates. 

Readily-accessible information is crucial to improving user choice and reducing drop-out rates. Students need better curated, public information to make career decisions. It has been demonstrated that students without adequate information in areas such as course quality, student fees and employment opportunities are more likely to make poor educational choices. 

The Commission recommends all governments, in collaboration with training providers, to:

  • Establish the National Careers Institute (NCI) as a central information hub. The hub will be a trusted source for VET information and fill significant information gaps such as: student fees, RTO quality, expected employment opportunities and credit pathways.
  • Administer the ‘Employer Questionnaire’ and analyse the data for opportunities for quality improvement.
  • Establish a VET ombudsman to receive, assess and resolve complaints from VET students.

Training providers will be required to submit the required information, outlined above, to the NCI. The collected information will be displayed publicly on the hub to prospective students, so providers must make sure they provide accurate information.

Providers will also need to demonstrate the ability to improve their quality of services, as indicated by the Employer Questionnaire or complaints received through the VET ombudsman (if any).

4. Reforming the trade apprenticeship system

The effectiveness of the Australian apprenticeship system has long been in debate. There have been persistent skills shortages in trade occupations, and a large decline in the commencements and completion, 30% and 40% respectively, since 2015. 

The Productivity Commission recommends the following to all governments:


  • Screening prospective candidates and employers to ensure better matching.
  • Improving the coordination and delivery of apprenticeship support services.
  • Making pathways to trade occupations more flexible for mature-age students.

The extent of this reform is still being determined. Providers offering apprenticeship programs should monitor news from the Productivity Commission to keep up with updates.

The Australian Productivity Commission has called for an improved national skills agreement that will pave the way for a more productive and well-rounded workforce.

The Australian Government is currently negotiating a new NASWD with State and Territory governments. We are looking forward to the announcement of a new agreement that will provide increased opportunities for students, employers and VET providers.

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Claudia Reiners
Head of Strategy
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