From Public Good to Corporate Enterprise: The Financialisation of Universities - Causes, Consequences, and What Must Be Done

John Howard, 9 September 2025

In recent months, Australian universities have faced increasing scrutiny over their role in the economy, particularly regarding their growing emphasis on financial sustainability. This shift, driven by the imposition of commercial accounting standards and financial reporting, has transformed universities into public corporations, and even public enterprises, which are assessed under financial performance metrics similar to those of private businesses.

Although these measures were initially driven by the accounting standards bodies to improve transparency, efficiency, and public accountability, they have ultimately compromised universities' capacity to accomplish their traditional missions.

Many leaders, academics, and stakeholders in the sector and the community wish to return to the fundamental values of scholarship, community engagement, and knowledge creation; however, they increasingly feel constrained by the terminology of corporate finance, such as operating margins, gross and net earnings, return on investment (ROI), and key performance indicators (KPIs), which are not really appropriate for educational institutions.

The Financialisation of Universities: A Pathway to Growth?

Most Australian universities have been established and incorporated through State or Territory legislation as statutory public corporations, with the Australian National University created under Commonwealth legislation. Universities have long been recognised as public bodies, holding both Deductible Gift Recipient (DRG) status for tax purposes and charitable status for the advancement of education. During the 1990s, the introduction of accrual accounting frameworks and the influence of New Public Management significantly reshaped their governance and operations, aligning them more closely with commercial and managerial practices.

Since the adoption of accrual accounting and alignment with International Financial Reporting Standards, Australian universities have been assessed by Government Auditors General using frameworks originally designed for private enterprises. This has introduced measures of financial performance, profitability, revenue growth, and return on investment, which sit uneasily with their broader public purposes. At the same time, research-based metrics such as citations, HDR completions, and grants provide only indirect connections to financial outcomes.

Several of these metrics push universities to equate success with expansion, mirroring corporate growth models. But many of the world’s most respected institutions, such as Harvard, Caltech, ETH Zurich, or the London School of Economics, have relatively small student numbers compared to the larger Australian universities. Their strength is not in scale but in focus, intellectual intensity, and distinctive academic culture. By privileging size over quality, growth-oriented metrics risk homogenising universities and diminishing the diversity and specialisation that underpin long-term excellence.

With the growth in the size of Australian universities, financial sustainability has, ironically, become a dominant concern, often overshadowing universities’ intellectual and civic contributions. Australia’s largest universities are substantial providers of international education, major property developers, investors in equity and bond markets, and owners of extensive financial and entrepreneurial assets. In financial terms, they are comparable to some of the larger publicly listed corporations.

In 2023, the latest year for which comprehensive results are available, universities reported a combined $40.0 billion in revenues and $39.9 billion in expenses. They also reported $110.8 billion in total assets and $74.2 billion in net assets. At the end of the financial year, they held $6.1 billion in cash and cash equivalents. This information is presented in the table below, along with details for the total of Go8 universities and the nation’s three largest universities. 

Sector	Revenues ($billion)	Expenses ($ billion)	Total Assets ($ billion)	Net Assets ($billion)	Cash/Cash Equivalents at End of FY ($billion)
All Universities	40.0	39.9	110.8	74.2	6.1
Group of Eight	21.3	20.3	51.1	34.2	2.0
The University of Sydney	3.4	3.1	10.1	6.9	0.8
The University of Melbourne	3.2	3.1	11.7	8.0	0.2
Monash University	3.0	3.0	6.5	3.6	0.3

Given the financial significance of the public higher education sector, it is unsurprising that there are strong expectations for accountability from both the government and the community. However, these expectations have gone further than intended, with business imperatives becoming increasingly entangled with academic life.

The Consequences of a Fixation with Business Imperatives 

Normally, in business, a clear distinction exists between financial accounting, concerned with statutory reporting, and management accounting, used for planning, budgeting, and decision-making. In universities, however, this distinction has narrowed. External reporting requirements, framed by commercial accounting standards, now seem to drive internal budgeting and performance processes. The effect is that resource allocation decisions are increasingly shaped by compliance-oriented financial results rather than by information tailored to support academic and strategic priorities[1].

When external financial reporting standards spill into internal management processes, they reshape how cost recovery is calculated. In business, each unit is typically expected to show that it covers its own costs. Universities, however, have long relied on deliberate cross-subsidies between disciplines, for example, revenue from business or law schools underwriting the higher costs of medicine, science, or humanities. These cross-subsidies are intentional and reflect the idea that a university is an integrated institution serving a broad educational, cultural, and social missions.

The application of commercial accounting logic risks obscuring this practice. Cost recovery calculations that treat each course or faculty as an independent financial unit can present cross-subsidies as inefficiencies or deficits, rather than as structural features of a balanced academic portfolio. This can distort internal decisions, penalising disciplines that are central to a university’s identity but not “profitable” in narrow terms. In turn, it undermines a governance tradition that views the university as a whole-of-institution enterprise, rather than a collection of business units.

Any student in an introductory marketing course understands that successful corporations routinely cross-subsidise less profitable business units to build brand equity and market impact. Yet the economists, consultants and accountants from major professional services firms who have advised universities on cost-cutting measures may never have encountered such marketing fundamentals, bringing instead a narrow focus on unit-level profitability that overlooks strategic value creation. Great universities operate according to strikingly similar principles, competing fundamentally on the basis of eminence and prestige rather than unit-level profitability.

Disciplines in the humanities, arts and social sciences, whilst potentially generating narrow financial losses, often deliver substantial global prestige that enhances an institution's overall reputation and competitive positioning in international rankings and academic networks. A distinguished philosophy or anthropology department, or an acclaimed creative writing or political science program, may contribute more to institutional brand value than any number of profitable professional courses; yet, this contribution remains invisible within cost-recovery frameworks that privilege immediate financial returns over reputational capital.

Traditionally, universities have functioned as hubs of knowledge, promoting research, critical inquiry, and public engagement. They served as centres of intellectual exploration, dedicated to the pursuit of knowledge creation and dissemination for the greater good. However, the implementation of corporate-style financial management has reshaped the priorities of universities. This shift has resulted in significant consequences. Academic programs and research areas that do not guarantee immediate financial returns or contribute to the narrow metrics utilised in funding allocation models are increasingly underfunded or neglected, even though they hold significant long-term societal value.

The pressure to generate revenue has driven universities to prioritise full-fee-paying international students, frequently to the detriment of domestic access and community engagement. Many universities now face challenges in upholding their commitment to education and the public good, compelled instead to validate their existence through financial metrics.

The Pressure to Produce 'Job-Ready' Graduates

A dominant challenge for universities today is the expectation that they produce graduates who are immediately ‘job-ready’. Governments, employers, and policymakers frequently stress the need for universities to align courses with workforce demand, equipping students with skills that can be directly applied in professional settings. This has encouraged a rapid expansion of micro-credentials, industry-aligned courses, and work-integrated learning opportunities. The language of employability now permeates university strategies, marketing, and government policy frameworks.

While graduate employability is a legitimate concern, the emphasis on short-term vocational outcomes risks narrowing the broader educational role of universities. Traditional disciplines, particularly the humanities and pure sciences, have faced reduced support as resources are channelled towards fields with an apparent more immediate economic payoff. The effect is a constriction of students’ exposure to critical inquiry, creativity, and interdisciplinary perspectives. Ironically, these qualities underpin adaptability in a labour market that is itself in flux, where specific technical skills can quickly become obsolete.

Excessive attention to employability also risks undermining universities’ capacity to cultivate independent thinkers, informed citizens, and innovators capable of addressing complex social, cultural, and ethical challenges. A university education has always extended beyond immediate job preparation, providing the intellectual foundation for lifelong learning and civic contribution. Narrowing this mission to vocational training alone diminishes the very attributes that employers consistently identify as most valuable in the long term, covering resilience, communication, problem-solving, and leadership.

Moreover, despite the rhetoric, both students and employers have expressed dissatisfaction with the outcomes of university employability initiatives. Many industry-aligned programs are considered too generic or poorly integrated into broader curricula. At the same time, a growing number of non-university higher education providers (NUHEPs), private colleges, and online platforms have moved aggressively into this space, offering targeted, flexible, and employment-focused programs. In many respects, these providers resemble the former Colleges of Advanced Education, which were absorbed into the Unified National System in the late 1980s, a move widely regarded as a strategic error that blurred institutional missions.

Against this backdrop, universities, policymakers, and accounting-driven consultants may need to reconsider whether pursuing employability as a core competitive strategy is sustainable. A more viable approach could be to reaffirm their original missions, knowledge creation, intellectual development, and civic contribution, while accounting separately for professional training activities. By clarifying the financial and strategic distinction between core and supporting missions, universities can better position themselves in an increasingly diversified higher education landscape.

A Global Phenomenon: How Other Countries Have Responded

The financialisation of universities is not unique to Australia. Over the last three decades, higher education systems across the world have grappled with similar pressures, but the responses have varied significantly.

In the United Kingdom, the introduction of tuition fees in the late 1990s, coupled with increasing reliance on commercial income, accelerated the adoption of market-oriented models. Frameworks such as the Research Excellence Framework (REF) and Teaching Excellence Framework (TEF) institutionalised performance-based funding, embedding competitive metrics that privilege measurable outputs over broader academic freedoms.

In the United States, financial pressures have long shaped higher education, particularly in private universities that rely heavily on tuition fees and endowments. Public universities, once supported by substantial state investment, have also faced demands to demonstrate financial sustainability. The outcomes have included higher tuition fees, the widespread use of adjunct faculty, and deep cuts to public funding. The dramatic rise in student debt exemplifies the consequences of shifting financial responsibility from governments and institutions to students and their families.

By contrast, European systems, such as those in Germany and Norway, have largely resisted commercialisation. German states have abolished most tuition fees, while Scandinavian countries continue to provide strong public funding. These models reflect a commitment to higher education as a public good rather than as a market commodity. They demonstrate that alternative approaches to funding can maintain academic quality without subordinating universities to commercial logics.

Reclaiming the University’s Public Mission

Despite the spread of financialisation, there is growing recognition across the sector that current models are unsustainable. Universities must be allowed to reassert their core roles: advancing knowledge, nurturing critical thinking, and contributing to the public good. Achieving this requires a fundamental rethinking of the financial frameworks that shape their operations.

One step forward is the adoption of a dual accounting framework that distinguishes between financial sustainability and the academic mission. Evaluation should extend beyond balance sheets to include contributions to research, teaching quality, and societal impact. Governments must accept that universities are not businesses, and accountability mechanisms must reflect their educational and civic purposes.

A longer-term rebalancing will require new funding arrangements that prioritise public value. Options include reinstating block funding for research fields with limited commercial potential, supporting outreach and community programs, and embedding accountability measures that highlight educational quality and social benefit rather than short-term returns.

Conclusion

The financialisation of higher education is a global phenomenon, but its trajectory in Australia raises difficult questions. If the current path continues, universities risk becoming locked into market logics that prioritise financial viability over academic purpose. The likely consequences are further program closures, greater reliance on international student markets, and a narrowing of research agendas to those areas with immediate commercial potential. Such a future would weaken universities’ broader contribution to national culture, democratic life, and long-term innovation.

An alternative is to embrace greater diversity within the sector. The German and US systems illustrate that higher education need not be uniform: different institutional types can coexist, each with distinct roles and funding models. In Australia, this might mean recognising that not all universities should pursue the same mission and creating differentiated frameworks that support both research-intensive institutions and more teaching- or professionally oriented providers. Such diversification could restore balance, allowing universities to serve multiple public purposes without forcing them all into a single commercial mould.

Ultimately, the challenge for policymakers is to decide whether Australian universities are to remain public institutions with broad civic responsibilities or whether they will be reshaped into market-driven entities. The answer to that question will determine the capacity of the sector to contribute to Australia’s long-term economic, social, and cultural future.

Universities are not businesses, and Faculties and Schools are not business units. To see universities in this way works against the values of cross-disciplinarity and collaboration that we seek in driving new knowledge and innovation outcomes.

[1] Financial accounting refers to statutory reports prepared under accounting standards, showing the organisation’s overall financial position and performance. Management accounting, by contrast, is used internally for planning, budgeting, and decision-making. It is forward-looking and selective, providing information tailored to management needs rather than to external compliance requirements.

Comments and suggestions on this insight by Will Brehm, Associate Professor at the University of Canberra and Host of the FreshEd Podcast, are greatly appreciated.

This Insight first appeared in Pearls and Irritations on 8th and 9th September 2025