Topic 2: Efficiency-Equity Debate

National Cabinet is to meet on Monday 11 July 2022 to discuss the current state-federal four -year schools funding agreement which is due to expire at the end of 2023. Under this agreement, public schools receive funding from the federal government of 20% while states contribute 75%, leaving a 5% gap. You are part of an expert, interdisciplinary committee led by the Minister for Education-the Hon Jason Clare MP- and have been asked to review the need for the federal government to increase its contribution to 25% to close the shortfall, estimated to cost an additional $2.5biliion a year.

Specifically, the National Cabinet would like to know whether the Australian government should continue to support this joint initiative and increase its contribution to 25% per year or cease co- contributing and leave this solely to the private market to supply.

In your presentation, you should discuss key microeconomic concepts such as Efficiency, Equity, Private and Public Goods. Your demand and supply analysis framework should represent the Primary & Secondary Education Market. Please read Chapter 5 "Market Outcomes and Tax Incidence" p.164- 165 and "Market Inefficiencies: Externalities and Public Goods", from page 227, to help you with your briefing and finding other credible resources (e.g. peer reviewed journal articles) which explore these issues further. The use of real data (from grey literature) where possible to support your presentation is desirable.