The Drift to Private Schools in Australia: Understanding its Features

Government subsidies have provided a major source of funds to private schools in Australia for three decades. The increasing level of private school subsidies since the mid-1970s has contributed to a steady increase in the proportion of students enrolled in private schools. This growth in the private school share of enrolments was not inevitable, but has been the outcome of government policies. We use an economic framework that focuses jointly on the price and quality of schooling and find that private schools have used government subsidies to increase the quality of their services (ie. to reduce staff: student ratios) rather than to reduce their fees. This strategy has ensured that the 10 percentage point increase in the enrolment share of private schools since 1975 has not substantially altered the socio-economic composition of their student body. One consequence is that a higher proportion of government school students now come from low socio-economic status (SES) backgrounds than 30 years ago. Therefore, schools in the government sector now educate more students from lower SES backgrounds than in 1975. The implications for public policy of these phenomena are discussed and directions for future research identified.