A deep contradiction has developed between Australia’s values and the way our schools are funded.

At the National Press Club, Prime Minister Albanese declared: “On the 3rd of May, the Australian people voted for Australian values; for fairness, aspiration and opportunity for all.”

Yet our education system no longer reflects these values. Among OECD nations, Australia now has one of the most socially segregated school systems. More than 80% of students from disadvantaged families attend public schools, compared with just 12% in Catholic schools and 8% in independent schools.

Australia’s performance on international tests such as PISA has steadily declined since 2000, with widening gaps between advantaged and disadvantaged students. Too many young people are underachieving, their potential wasted. Our funding model is clumsy, costly and wasteful – designed more by political compromise than by principles of fairness or efficiency.

How we got here

The roots stretch back to the Whitlam era, but the Howard Government’s New Schools Policy of the late 1990s accelerated the trend. It encouraged almost any group — religious or otherwise — to establish schools, even where public schools already existed. These schools were funded largely by the Commonwealth, allowed to charge fees and to select students. The result is a funding system that outsiders find almost impossible to decipher.

Thirty years later, the negative consequences of this model are clear. It is seriously undermining our public school system, dividing communities and costing far more than it needs to. It entrenches inequality, yet survives because every reform attempt meets fierce resistance. Still, there has never been a better time for a Commonwealth government to design a fairer, simpler and less wasteful model.

How the model divides communities

The story of Bacchus Marsh is repeated across the nation. The local public high school, founded in 1921, is open to all and funded mainly by the state. In 1988, a new “grammar” school opened nearby, funded primarily by the Commonwealth, but also charging fees and selecting students.

In 2023, Bacchus Marsh College received $17,631 per student – the Schooling Resource Standard. The grammar school received $24,437 – half from governments, half from fees. A third of its recurrent funding went into capital works, with more than $36 million spent on new facilities in 2023. The College managed just $2.6 million.

Predictably, this created an uneven playing field and divided the community. Students at the College now come from families more disadvantaged than 67% of Australian schools, compared with only 13% at the grammar school. Forty percent of Grammar students are from non-English speaking backgrounds, compared with 10% at the College. Unsurprisingly, the grammar school boasts higher retention rates, stronger test results and greater community satisfaction. Graduates from the College find their career options limited – not by talent, but by circumstance.

This pattern is repeated across the nation. With fees exceeding $8000 a year, many Catholic schools now enrol far fewer students from disadvantaged families than they once did – and significantly fewer than nearby public schools.

How the model escalates costs

What has become clear are the harmful consequences of allowing some schools to receive public funding and to charge fees in a largely unregulated and expanding market. An “arms race” of extravagant capital works across Melbourne non-government schools has been evident for many years.

As a result, parents are paying fees well above the Schooling Resource Standard, which estimates the funding a school needs to meet its students’ educational needs.

For example, families of Balwyn High School and Carey Baptist Grammar School in Melbourne are at similarly high levels of socio-educational advantage. In 2023, Balwyn High School’s total recurrent income per student was $16,255, while Carey’s was $42,196, 81% of which came from fees.

Nearly one-third of this income was redirected into items such as capital works. Carey spent more than $21 million on capital works in 2023. Balwyn High School spent $570,892.

Yet there was little difference in educational outcomes such as VCE results and NAPLAN scores. Admittedly, these are not the only desirable outcomes — Carey may offer more extra-curricular activities — but questions arise about the relative efficiency of the two schools, as well as whether parents are truly getting value for money.

As this pattern is repeated across Australia, it’s not surprising that the country has the highest level of expenditure on private educational institutions in the OECD: 0.7% of GDP, more than double the OECD-wide average of 0.3%.

What reform could look like

Recent increases in federal Gonski funding are welcome, but fail to address the core problem: the split between federal funding for private schools and state funding for public schools. This division has been entrenching inequality and makes little educational sense. It’s time to be honest with ourselves and admit we can’t afford to go further down this road

Countries that perform better on international tests — such as Canada, the UK, Ireland and New Zealand — offer choice within a publicly funded system. Schools may have distinct features, but they cannot charge fees. This keeps performance gaps smaller and prevents segregation by class.

Australia could adopt a similar model. Both levels of government would develop a common formula, based on a revised SRS, to fully fund all schools – government and non-government. Schools could retain their ethos but would not be allowed to charge fees. Most private schools already receive close to or above 80% of the SRS, so the additional cost would be less than many assume.

Such reform would not abolish choice; it would simply make choice affordable and equitable. As in the UK and Canada, only a small minority of schools would remain outside the system.

Facing the objections

Independent Schools Australia has already called for all schools to move to 100% of the SRS, regardless of sector. That principle should apply – but without fees on top. If non-government schools claim they cannot survive without fees, the obvious question follows: why are public schools expected to survive on that level of funding?

Critics brand reform “class warfare”, but what is truly divisive is a model that enables private schools to segregate students by class and achievement while offering their staff better pay and conditions.

A matter of values

At its best, education binds a nation together. In Australia, it increasingly divides us – by income, by religion, by postcode. No parent should have to make sacrifices to secure a good education. Nor should any child’s opportunities depend on their family’s wealth.

Countries that outperform us show that fairness and excellence are not opposites. Smaller performance gaps, better average outcomes and cheaper, more efficient systems are possible. Australia can do the same.

Our best hope for reform in years lies with the current Labor Government. Designing a funding system consistent with its social justice principles is not only urgent – it is a test of whether we truly value fairness, aspiration and opportunity for all.

The views expressed in this article may or may not reflect those of Pearls and Irritations.