Australia's investment in children is falling, even as pensioner numbers rise

AUSTRALIA in 40 years' time is projected to have an extra 4.3 million people over the age of 65, but only 0.5 million more children. Education is by far the most potent source of modern productivity growth - tomorrow's prosperity.

And it lifts lifetime workforce participation rates and improves health outcomes, further helping to combat the adverse effects of an ageing population.

Yet in a shocking indictment of our education system, one in five Australians is functionally illiterate, and there has been no improvement in literacy among children in the past quarter of a century.

International forecasts of the percentage change in years of education between 2005 and 2020 prepared by Deutsche Bank put Australia last among 33 countries.

We must move beyond the stifling debate over public versus private provision of education to find ways of providing a quality education for every young Australian.

Why we need school education reforms: Virtually all the enrolment growth in the past 20 years has been in private schools. As parents move their children out of government schools into private schools the students remaining in many government schools are increasingly from disadvantaged backgrounds. The exodus of higher performing students from government schools is leaving many schools vulnerable and poorly placed to lift their standards.

A new school funding model: In a fundamental reform of Australia's education system, funding distinctions between government and private schools must be abandoned.

Instead, funding should be based on the needs of the child. It is the children who are important, not whether they are attending a government or a private school.

Schools with large numbers of children from disadvantaged backgrounds would receive more government funding than schools with children from more privileged backgrounds. Extra funds should be used for remedial literacy and numeracy support, professional development of teachers, and schemes to attract the best teachers and principals to the most disadvantaged schools.

A preschool education for all Australian children: Preschool equips four-year-old children with the skills to participate meaningfully in the classroom from the first day of formal education. Yet Australia spends less than any other Organisation for Economic Co-operation and Development country on preschool education.

Arrangements for providing early childhood education are different in each state and territory, the age at which children participate differs and there is not even agreement on a name for formal education before beginning primary school.

Not only is there no national policy on preschool education, the commonwealth has provided no financial support for preschool education since 1985 (with the exception of some indigenous preschool programs).

More than 58,000 four-year-old children miss out on a preschool education every year, most of them from disadvantaged families.

The commonwealth, state and territory governments should work together to create a nationally consistent preschool education system, with common starting ages and quality assurance.

Full-service schools: State and territory agencies with responsibility for the health, education and overall welfare of disadvantaged families could make a big difference by moving towards full-service schools and preschools.

A full-service school would have a school nurse, a visiting dentist and GP, a conflict resolution officer, a counsellor and a police officer. Marsden State High School in Logan City near Brisbane has constructed a student and community service centre to offer such a range of services.

Attracting and retaining the best teachers: Big improvements could be expected in educational outcomes for disadvantaged students by lifting teacher quality.

Although the starting salaries of Australian teachers seem reasonable, the rewards for experience and excellence appear to be very low. Disturbingly, there has been a heavy compression of pay scales for Australian teachers since 1996.

Since the quality of school principals has a powerful influence on the quality and performance of teaching staff, their salaries should be boosted over time by an average of at least 25 per cent (with pay variations according to quality), at a total cost to the nation of about $200 million a year.

Under the needs-based funding model, schools with large numbers of disadvantaged students would receive extra funding to allow them to attract the best teachers and school principals by offering better pay.

University funding: University places are increasingly being rationed according to capacity to pay full fees. Australia is the fifth most expensive place to study. All the countries ranking above Australia on the affordability index also rank above Australia on the productivity table.

The number of HECS places at Australian universities for Australian students must be increased. And to ease the financial pressure on universities, operating grants should be increased - and indexed according to a wage-cost index, rather than the general consumer price index.

The proportion of high school students completing a university degree needs to rise sharply. Yet the Coalition Government has predicted a decline in the number of university places for Australian students by 2015.

Australia should aim to double the proportion of young people going on to university by 2020, from about 30 per cent to 60 per cent.

The commonwealth will not be in a position to provide all of the necessary extra financing to double the number of university places.

A new funding vehicle should be developed that harnesses private resources for the public good.

Superannuation funds and other financial institutions could offer to pay a student's fees and living expenses in return for an agreed share of future earnings over an agreed number of years.

These Australian student equities would effectively allow young people to gain access to their own future earnings during their student days.

The amount financed need not be restricted to tuition fees; it could also cover living expenses, allowing students to spend more of their time on university studies without needing to work long hours in casual jobs.

Extra commonwealth-subsidised places would be concentrated on courses such as pure science and the education of artists, historians and other creative people.

And commonwealth funding would be available on the basis of a lack of financial capacity to pay full fees and living expenses while at university - an effective return to the system of commonwealth scholarships that applied before 1972.

Vocational education funding: In response to skill shortages, the federal Government has greatly increased the number of places for skilled migrants.

While extra immigration is a welcome contribution to sustaining Australia's prosperity, the sudden, large increase in the skill category is an admission of a national failure to turn out sufficient numbers of Australian tradespeople.

The case for increased public funding of vocational education is compelling. But the story is the same as for universities - the number of extra places required is likely to exceed the willingness of taxpayers to fund them.

Student equities might be especially well suited to vocational education, and could be provided by employers in a radically revamped apprenticeship system.

Voluntary bonding could be a feature in the scheme, where the apprentice agrees to stay with the employer for a specified period after gaining the training qualification. The terms of the equity arrangement in these circumstances would be more favourable to the apprentice than if no bonding arrangement were included.

Craig Emerson is a federal Labor MP. This is an edited extract from Vital Signs, Vibrant Society (UNSW Press, $29.95) which Opposition Leader Kim Beazley will launch at Gleebooks in Sydney today.