Skills and Workforce Development Agreement

Interim report

This interim report was released on 5 June 2020 and is a review of the National Agreement for Skills and Workforce Development and other issues.

You were invited to examine the interim report and to make written submissions by 17 July 2020.

The final study report was handed to the Australian Government on 15 December 2020 and released on 21 January 2021.

Please note: This interim report is for research purposes only. For final outcomes of this study refer to the study report.

Download the overview

Download the draft report

Key Points

The National Agreement for Skills and Workforce Development is overdue for replacement.
- It reflects the consensus in 2012 about how Australian, State and Territory governments should boost participation in training — including creating a national training entitlement, promoting 'user choice' led competition, and expanding access to income contingent loans.
- However, governments have stepped back from some of its policy aspirations. Targets have not been met and the performance indicators have proved to be deficient.
There is a manifest capacity to better allocate the $6.1 billion in governments’ spending on VET to improve outcomes.
Governments should consider reforms to make the VET system a more efficient, competitive market, driven by the informed choices of students and employers, with the flexibility to deliver a broad suite of training options.
This goal should be pursued through a new principles-based agreement. This study proposes a set of principles for such an agreement.
Based on these principles, some reform directions are clear, including:
- supporting effective competition in service delivery by establishing clear, contestable community service obligations
- better data collection and transparent, comprehensive reporting of the allocation of public funds to support regular assessment of governments’ policies
- better curated information for students and employers about career opportunities, the performance of registered training organisations (RTOs), course quality and prices
- reform of course pricing
- a single national regulator.
There are various options for reforms to VET funding, which will require further consultation and assessment. Reform options include:
- expanding access to VET Student Loans by relaxing loan caps and course and qualification restrictions, underpinned by strong risk management. This may be a preferred option to any additional subsidies
- simpler subsidy arrangements, such as:
  - binding arrangements on all governments to apply a nationally-consistent set of course subsidies, based on the efficient cost of delivery, with loadings to address higher delivery costs in some locations and to some student groups, or
  - replacing the proliferation of granular subsidy rates for courses with a limited range of subsidy rates, but otherwise leaving jurisdictions to set their own subsidy levels and allocation
- using student vouchers instead of subsidy payments to RTOs to facilitate user choice
- moving away from, or complementing, incentives to employers to train apprentices by using other approaches to support apprentices, including mentoring and pastoral care.
Regardless of the extent to which State and Territory governments adopt a common national approach to subsidies, there are strong grounds for them to use common methods to measure costs and determine loadings.

Media Release

Renewing Australia's VET system — Options for reform

Australia’s Vocational, Education and Training (VET) sector is underperforming, excessively complicated and suffers from ad hoc policy approaches, says an interim report released today by the Productivity Commission.

“The VET sector has been hit by COVID-19 and will also be part of the recovery strategy. A better VET sector will help people gain new skills and find jobs, ultimately lifting productivity and wages,” Commissioner Jonathan Coppel said.

The report floats options for a fundamental re-orientation of Australia’s VET system, with a revised Commonwealth-State agreement to set out an agreed, coherent policy direction.

“We hope the report will provoke a broad discussion of big reform. There is substantial scope to reduce waste and better target the $6.1 billion in government spending,” Mr Coppel said.

The challenges of COVID-19 have meant the VET sector has found new ways to deliver training online — we should be equally open to testing new ways to support people acquiring skills.

“We want to see an improved VET sector that gives students and employers more flexibility and choice,” Commissioner Jonathan Coppel said.

“It is time to think about shifting the focus from funnelling subsidies to training providers to giving students more help to choose the training they need. We now have dozens of different subsidy rates, even for the same courses,” Commissioner Malcolm Roberts said.

For example, one of the most popular VET courses in Australia is the Certificate 3 in Individual Support — the course you’d study to work in aged or disability care. Standard subsidies for this course vary by as much as $3700 across Australia.

The Commission’s approach also means students need better information on career opportunities and the quality and prices of courses.

The report looks at options for improving affordability by expanding access to student loans for a broader range of training, with safeguards to prevent the rorting that occurred under the VET FEE-HELP program.

The VET system, unlike the university system, is co-managed by Commonwealth and State/Territory Governments and major changes will need cooperation.

The interim report can be found at www.pc.gov.au and submission or comments can be made through the website.