Is VET poised to make a comeback?
Australia’s economy and workplaces are being reshaped by global forces – from rapid technological advancement to the clean energy transition and our ageing population. These changes are increasing employer demand for highly skilled graduates. However, over the past two decades, higher-level vocational education and training (VET) has experienced a decline in funding, a decline in enrolments, and in perceived relevance, while higher education enrolments have expanded substantially.
Recent reforms to the funding and design of both VET and higher education indicate a potential shift which might upend this trend. To capitalise on this opportunity, governments must recognise the distinct but complementary roles of both sectors and ensure funding and reforms are aligned to support their respective strengths.
Public Commitments to Tertiary Reform
Governments have consistently acknowledged the value of both VET and higher education as essential contributors to Australia’s economic growth and social inclusion.
The National Skills Agreement commits the Commonwealth, State and Territory governments to ensuring that “the national VET system provides high-quality, responsive and accessible education and training to boost productivity, deliver national priorities and support Australians to obtain the skills and capabilities they need to prosper”.
Simultaneously, the Universities Accord process, launched by the Minister for Education, has posed fundamental questions about the future of higher education, including how to better connect it with VET. The final Accord Panel Report highlights the need for increased participation in both sectors, citing modelling that projects over 80% of employment growth to 2050 will require post-secondary qualifications—30% of which are VET-related.
Despite this dual commitment, policy settings continue to favour higher education due to disparities in funding, employer perceptions, and curriculum content. Without targeted reforms to address these imbalances, growth in higher education may continue to erode VET enrolments.
A Shift to Higher Education
From 2004 to 2023, Australia’s working-age population grew by 29%. Over the same period:
- government-funded VET enrolments grew by just 11%
- government-funded enrolments in higher-level VET programs (Diploma and above) declined by -6%
- domestic undergraduate enrolments surged by 50%, and
- sub-degree and enabling program enrolments in higher education (the higher education courses with the greatest overlap with VET qualifications) increased by a remarkable 294%.
Table 1: Changes in the working age population and domestic VET and higher education enrolments (2004 – 2023)
This divergence reflects both systemic and policy-driven factors that have favoured university degrees and pathways programs over VET. Even as the labour market increasingly values post-secondary education, higher-level VET has not kept pace with either demand or perception.
Understanding the Funding Divide
Between 2008 and 2014, higher-level VET enrolments increased under the generous but flawed VET FEE-HELP scheme. However, its replacement in 2016 with the more restrictive VET Student Loan scheme led to a decline in enrolments. More recently, the COVID-19 pandemic and then the introduction of Fee-Free TAFE saw higher-level VET enrolments grow.
It is clearly too early to determine if the 2023 increase in higher-level VET enrolments is a one-off spike, or the start of a trend – but it appears that the removal of student fees for many higher level VET programs (through Fee-Free TAFE), combined with changes in university funding impacting poorer more price-sensitive students, may be encouraging students to look at higher-level VET instead of university.
The Job-ready Graduates (JRG) university funding model significantly increased student fees for humanities and communications degrees. While intended to steer students toward more ‘job-ready’ disciplines, it has had limited success in doing so. Combined with cost-of-living pressures, JRG reforms appear to have contributed to declining higher education enrolments, particularly among poorer students from under-represented groups.[1]
While it is still too early to assess if Fee-Free TAFE is making higher level VET a better option for some prospective university students, these changes highlight the complex interplay between changes in the funding of VET and higher education. Being cognisant of this interplay is particularly important as the Commonwealth government (and States and Territories) have already agreed on the level of funding they will commit to VET over the next 4 years through the National Skills Agreement, but the Commonwealth is now embarking on changes to university funding.
Universities will receive an additional $2.5 billion over the medium-term to respond to recommendations of the Australian Universities Accord Panel. And the interim Australian Tertiary Education Commission (another Accord Panel recommendation) is expected to make further positive changes to university funding in the near future.
If the Commonwealth government’s anticipated higher education funding changes do not take account of their potential consequential impact on VET, these funding shifts risk further disadvantaging VET.
Employer Perceptions of VET
Analysis by Jobs and Skills Australia shows that VET graduates with Diplomas and Advanced Diplomas earn on average $50,000pa within their first 12 months of graduation. By contrast, the average salary for students completing undergraduate degrees is $70,000 within the first six months of graduation.
Employers in some fields may also be prioritising degrees over diplomas because of the content of some VET programs, as a consequence of the introduction of national Training Packages in some industries, and the unavoidable delays in keeping Training Package content updated given current processes.
As an Employment Facilitator stated in evidence to the 2023 House of Representatives’ Inquiry into the Status and Perceptions of VET:
“We get a lot of feedback [from employers] saying that, by the [time a] program or the curriculum is developed, it’s fallen behind where industry’s at … the speed of change is not as rapid within the education, or the VET system, as it is in the actual industry, and employers are saying there’s this widening gap.”
Even the Australian Skills Quality Authority (ASQA) is now referring to training packages as being “pre-generative AI” ie they have not been updated to reflect this technology since its general release in 2022.
The Need to Modernise VET Qualifications
The VET Qualifications Reform project aims to lift “relevance and value of VET qualifications for learners and employers”. With Skills Ministers having agreed to this new approach to VET qualification design to be introduced from this month, the sector will soon start to see if these changes can make the difference and offer learners and employers knowledge and skills which are more aligned to contemporary workplaces.
And for the first time in its operation ASQA has now explicitly given guidance to VET providers that they must go beyond training packages to make sure the content they deliver to their students is current and industry-relevant. The April 2025 ASQA IQ update states:
Some industries such as retail, healthcare, hospitality and manufacturing are also incorporating AI into their operations. It can be crucial for students to use these technologies as part of their training, so they are prepared for the demands of an AI-driven workforce. You should be aware that while there is an expectation that generative AI be used in some industry areas, this may not be reflected in training packages which are pre-generative AI. It is your responsibility as a provider to undertake effective industry consultation to ensure that your training and assessment gives graduates industry-relevant skills and knowledge and the ability to apply these in the workplace.
This new and explicit regulatory requirement will challenge ASQA’s auditors when they assess provider compliance, but it will allow high-performing, industry-engaged providers to move beyond the limitations of Training Package content and teach the skills employers need.
Another promising new development is the recent approval of vocational degrees at AQF Level 7. These qualifications are intended to meet employer demand for advanced skills and practical knowledge, offering an alternative to traditional undergraduate degrees.
If they are funded on a par with higher education programs – through income-contingent loans, Commonwealth Supported Places, or other subsidies – vocational degrees could make VET more attractive to learners and more relevant to employers. Designating them as Fee-Free could further enhance their appeal and help rebalance the tertiary system.
Conclusion: A viable pathway to greater tertiary harmonisation
Jobs and Skills Australia has called for work to be progressed on a harmonised tertiary education roadmap with greater coordination between the VET and higher education sectors and the explicit involvement of State and Territory Ministers.
Against this backdrop the VET policy landscape continues to prioritise improving the relevance of VET course content through:
- VET qualifications reforms
- The introduction of vocational degrees and,
- by explicitly compelling providers to move beyond ‘pre-generative AI’ training packages where these are outdated.
Collectively these measures will help to make VET course content more relevant to employers and can be expected to improve the employability of VET graduates, their productivity and their earning potential.
Combined with the continuation of Fee Free VET and TAFE funding initiatives, which improve the affordability and attractiveness of higher-level VET, enrolments can be expected to continue to recover and perhaps even thrive.
In doing so, Australia would not only enhance the responsiveness of its education system but also secure the skills base necessary for a future-ready workforce.
Alternatively if the ATEC throws huge amounts of additional funding at public universities – and VET course content reforms stall – we can expect to see a continuation of the historic trend away from higher level VET and into higher education.
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[1] In late June the Minister for Education released preliminary data on commencing domestic undergraduate students showing an increase on 2023 levels. No final 2024 data on commencements or enrolments have yet been released.
