Projected demand for independent schools in New South Wales over the next 40 years: Summary report

Projected demand for independent schools in New South Wales over the next 40 years: Summary report Association of Independent Schools of New South Wales 22 October 2014

Glossary ABS ACT AIS ASGS DAE FTE GDP GSP IEO MCEETYA NSSC NSW Australian Bureau of Statistics Australian Capital Territory Association of Independent Schools Australian Statistical Geography Standard Full-time equivalent Gross Domestic Product Gross State Product Index of Education and Occupation Ministerial Council on Education, Employment, Training and Youth Affairs National Schools Statistics Collection New South Wales SA4 Statistical Area Level 4 TFR Total Fertility Rate Commercial-in-confidence

Contents Glossary... i Executive Summary... 1 1 Background... 5 1.1 Independent schools in NSW... 5 2 Economic and demographic conditions and projections... 11 2.1 New South Wales economic conditions... 11 2.2 New South Wales population backdrop... 14 3 Future demand for independent schools... 20 3.1 NSW future demand... 20 3.2 Regional future demand... 21 3.3 Scenarios... 23 Appendix A : Methodology... 24 Appendix B : Regional classification... 27 Limitation of our work... 29 Charts Chart 1.1 : NSW independent school campuses by opening year, cumulative count... 6 Chart 1.2 : NSW independent schools, by number of students - 2013... 9 Chart 1.3 : Independent school students as a share of total students by region, 2013... 9 Chart 1.4 : Independent school students as a share of primary, secondary and total students, by region 2013... 10 Chart 2.1 : Real output growth, NSW and Australia... 11 Chart 2.2 : NSW share of national totals... 12 Chart 2.3 : NSW Employment across selected occupations... 13 Chart 2.4 : Population by age and sex, Australia and NSW June 2013... 15 Chart 2.5 : Projected NSW population growth, 2013 to 2053... 17 Chart 2.6 : Projected NSW population growth, 5-18 years age group, 2013 to 2053... 18 Chart 3.1 : Projected independent school enrolments, by sex... 20 Tables Table 1.1 : NSW Independent schools and total students by region 2013... 8 Table 2.1 : Projected employment growth by region, NSW 2013 to 2033... 14

Table 2.2 : Key demographic assumptions... 16 Table 2.3 : Regional population projections, 5 to 18 years, 000s... 19 Table 3.1 : Projected independent school enrolments by age, persons... 21 Table 3.2 : Projected demand for independent schools by region, NSW 2013 to 2053... 22 Table 3.3 : Comparison projected enrolments at independent schools in 2053, alternate scenarios... 23 Figures Figure 1.1 : NSW schools and students by sector, 2013... 5 Figure 1.2 : NSW independent school locations... 7 Figure B.1 : SA4 regions, New South Wales... 27 Figure B.2 : SA4 Regions, Sydney... 28

Executive Summary has been engaged by the Association of Independent Schools of New South Wales (AIS NSW) to prepare long term demographic forecasts and demand for independent schooling projections for NSW. This report describes the methodology used and summarises the results obtained. Detailed results have also been provided to the Association in the form of an interactive Excel Tool. Background and context AIS NSW is the peak body representing the independent schooling sector in NSW. Schools represented in this sector are religiously, culturally and philosophically diverse, and range in both student body size and fees. Although concentrated to a certain extent in Sydney, there are independent schools located across the State. The sector also includes a number of schools which cater to children with special needs. As part of the non-government sector of primary and secondary education in NSW, independent schools have been gaining an increasing market share of students over recent years. In 2013, around 184,100 of the 1.15 million students in NSW were enrolled in independent schools, equivalent to around 15.9% of all students. This proportion varies across regions, ranging from 40% of school-aged children living in the Eastern Suburbs of Sydney, to less than 10% living in Western NSW. Drivers of demand While income represents a clear signal of the capacity of a household to fund nongovernment education, enrolment in some non-government schools may also reflect other drivers, including religion and disability. In many cases, these characteristics are specific to individual schools, and are unobservable in the enrolment data. As such, it is difficult to individually determine demand for these types of schools. The ABS (2006) noted that household income is a major influence on parental choice of school for their children. That said, parent s aspirations, attitudes and personal experiences are also important in determining the type of school best suited to their child. Therefore, for some households, school choice may be relatively independent of their level of income. More specifically, the distribution of enrolments by income using data from the 2011 Census shows that while income may be a powerful driver for some households, and may increase the propensity to enrol in non-government schools, school choice for individual households may be relatively independent of their level of income. 1

Chart i: Share of income by enrolments, NSW, 2011 Census High income Medium income Low income 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Australian Bureau of Statistics, Note: Catholic includes independent Catholic schools. This suggests that income, while being an important variable, is best analysed in conjunction with other household characteristics. In particular, occupation and education of parents have been found to have a positive relationship with enrolment at independent schools. Both of these characteristics are also related to income. Therefore, the relationship between these variables and school enrolments is a key underlying predictor of future enrolment levels for independent schools. As a result, the model used for this project incorporates the changing occupation and employment structure of NSW and its regions. The relationship between independent school enrolments and the wider NSW economy are built around an index that is based on the ABS Index of Education and Occupation (IEO). Future demand for independent schools Government Catholic Independent projects that demand for independent schools will increase from around 184,100 students in 2013 to 211,000 students in 2023 and 257,700 students in 2053. This equates to an average annual growth rate of 0.85% per year over the projection period. The speed of the gain over the first decade of these projections is underpinned by a lift in birth rates since the middle of last decade. In 2004 there were 82,000 births in NSW, but that had risen to 98,000 by 2013. Moreover, independent school enrolments are projected to grow faster than school age population, because the share of families with a higher propensity to send their children to independent schools is expected to grow as a share of the population. 2

This projection is not constrained by supply (that is, the ability of existing or new schools to cope with this number of students has not been considered), and is based on a combination of population growth and an anticipated shift in occupational profile of residents in the State. The total growth over the period (40%) is equivalent to an additional 74,000 students on top of current student numbers. Overall, the share of students enrolled at independent schools in NSW (relative to total students) is forecast to increase from around 15.9% in 2013 to 16.6% by 2034, after which the share is expected to remain relatively constant. This reflects the employment forecasts for the NSW economy, which see a shift towards higher skilled occupations in the short to medium term (favouring independent school enrolments), before moderating over the longer term. Chart ii: Share of students enrolled at independent schools in NSW (relative to total) 17.0% Forecast 16.5% 16.0% 15.5% 15.0% 2009 2019 2029 2039 2049 Source: Overall, the population of NSW is anticipated to grow from 7.4 million in 2013 to 11.1 million in 2053, while the number of school-aged children (5 to 18 years) is expected to grow from 1.3 million 2013 to 1.7 million in 2053. This is a significant increase in itself, with the primary and secondary education system in NSW being required to cater for an extra 440,000 students in addition to its current capacity. If the number of schools (3,081) in NSW were to remain unchanged, this would increase the average size of schools in NSW from 375 students in 2013 to around 550 students per school by 2053. 3

Regional demand The number of students enrolled in independent schools in the Greater Sydney area is expected to increase from 128,400 in 2013 to 185,500 by 2053, with average growth of 0.92% per year anticipated over the projection period. This represents growth of 45% (or 57,100 additional students by 2053) in total independent student numbers in the Greater Sydney area compared with 2013. Growth is expected to be lower for students living in the remainder of NSW, with independent student numbers expected to grow from 55,700 in 2013 to 72,200 in 2053, at an average annual rate of 0.65%. This difference between growth in the Greater Sydney area and the remainder of NSW is predominately due to the projected slower overall growth in both the total population and school-aged population in regional areas of the State. Table ii: Projected demand for independent schools, Sydney and regional areas 2013 2023 2033 2043 2053 Growth* Greater Sydney 128,385 151,592 161,357 170,693 185,517 0.92% Rest of New South Wales 55,667 59,458 63,280 66,732 72,225 0.65% Total New South Wales 184,052 211,048 224,641 237,424 257,744 0.85% Source: * Average annual growth rate, 2013 to 2053 Limitations Our projections of future demand assume that the types of households who will seek to enrol their children in independent schools in the future have the same (or similar) characteristics as those who currently enrol their children in independent schools. If this profile were to change, this may alter the results of the projections. The projections of demand for enrolments at independent schools have also been calculated in isolation from supply. More specifically, although there may be an increase in the number of school-aged children with household characteristics which align with the current profile of demand, there may not be adequate capacity to supply places to all these children. As a result, although demand for independent schools may grow, this may not be accurately reflected in future enrolment figures. Similarly, no changes in relative prices have been factored in to the projections. However, although the modelling does not explicitly incorporate household income as a variable, it is proximately included through the use of parent occupation (or skill level), which has a strong relationship to income. Any increase (or decrease) in fees may reduce (or increase) demand for independent school places. Finally, regional demand modelling has been conducted on a place of usual residence basis (where people usually live), rather than a place of education basis (the location of campuses where children are enrolled). Further analysis on this relationship will be available following the 2016 Census; however consideration should be given that many children particularly in areas of Sydney may cross regional boundaries in order to attend school. As a result, schools located on or near regional boundaries should also consider the population projections, and projections of demand, of the regions adjacent to their own. 4

1 Background Figure 1.1 below outlines the current number of schools and students by sector in New South Wales. Figure 1.1: NSW schools and students by sector, 2013 Total schools, NSW N= 3,081 Total students, NSW N= 1,154,159 Government N= 2,164 Government N= 755,346 Non-Government N= 917 Non-Government N= 398,813 Systemic Catholic N=539 Systemic Catholic N=251,409 Independent N=378 (including Independent Catholic = 45) Independent N=184,052 (including Independent Catholic = 36,609) Source: Australian Bureau of Statistics, Non-government School Census, 1.1 Independent schools in NSW The independent school sector has a long history in NSW, with the first schools established in the 1850s. At the time of Federation (1901), there were 37 independent school campuses. This number continued to grow slowly, particularly during the periods of World Wars I and II, when very few new independent schools were established. Chart 1.1 below shows the cumulative count of independent school campuses in NSW over the past two centuries including their rapid increase in numbers in recent decades. 5

Chart 1.1: NSW independent school campuses by opening year, cumulative count 500 400 300 200 100 0 1856 1876 1896 1916 1936 1956 1976 1996 Source: MCEETYA Geographic Location Database (unpublished), 1.1.2 Student enrolments In 2013, there were 184,052 FTE students enrolled in independent schools across NSW, which was around 15.9% of the total number of students in NSW. Slightly more than half (52.1%) were males, and 47.9% were females, and there were more males than females enrolled across each grade of both primary and secondary school. The highest total number of enrolments was for Grade 7 (19,626 students), and the lowest was for Grade 2 (9,679 students). 1.1.3 School location Independent schools are distributed across NSW, with schools located in metropolitan, regional and rural and remote areas, with significant concentration in the Greater Sydney area. Using the latitude and longitude data in the MCEETYA Geographic Location Database, the location of school campuses have been mapped by Statistical Area Level 4 (SA4) 1, shown in Figure 1.2. 1 This report uses the Statistical Area Level 4 (SA4) structure as defined by the ABS. SA4s are largely designed to reflect labour markets within each State, and provide the best socio-economic breakdown of the Australian statistical geography. 6

Figure 1.2: NSW independent school locations Source: MCEETYA Geographic Location Data base (unpublished), Sydney North Sydney and Hornsby has the largest number of independent school campuses (43), corresponding with the largest number of school enrolments (25,583) when measured by the location of the campus. Sydney Sutherland and Far West and Orana have the smallest number of campuses (7), although the Capital Region has the smallest number of students actually attending schools in the area. This is likely related to the accessibility to independent school campuses located across the border in the Australian Capital Territory. A count of independent school campus locations and total 2013 students for all SA4 regions (by campus location and place of usual residence) is shown in Table 1.1 below. Where independent school enrolments by place of education are larger (or smaller) than independent school enrolments by place of usual residence, this implies that students attending schools in this region are travelling across SA4 region borders to attend school. For example, there are around 8,400 students enrolled in independent schools with campuses in Sydney City and Inner South, however we estimate that there are only around 3,000 students who attend independent schools living in that region. 7

Table 1.2: NSW Independent schools and total students by region 2013 Count of school campuses Total students, Place of education* Total students, Place of usual residence Capital Region** 10 943 2,948 Central Coast 17 6,097 7,123 Central West 12 3,349 4,135 Coffs Harbour Grafton 11 2,995 3,566 Far West and Orana 7 1,479 1,955 Hunter Valley exc Newcastle 13 3,993 5,874 Illawarra 14 5,690 5,380 Mid North Coast 12 2,893 3,859 Murray 14 1,844 2,926 New England and North West 14 2,923 4,370 Newcastle and Lake Macquarie 18 6,917 7,730 Richmond Tweed 23 5,458 5,702 Riverina 8 1,745 3,076 Southern Highlands and Shoalhaven 15 5,712 4,148 Sydney Baulkham Hills and Hawkesbury 18 8,732 9,000 Sydney Blacktown 15 5,229 7,661 Sydney City and Inner South 18 7,592 3,048 Sydney Eastern Suburbs 27 14,799 12,350 Sydney Inner South West 28 11,587 13,948 Sydney Inner West 19 12,748 6,775 Sydney North Sydney and Hornsby 43 25,347 19,154 Sydney Northern Beaches 22 8,283 8,369 Sydney Outer South West 13 6,216 6,472 Sydney Outer West and Blue Mountains 21 6,481 8,626 Sydney Parramatta 19 9,796 8,156 Sydney Ryde 7 3,128 4,308 Sydney South West 23 9,535 9,318 Sydney Sutherland 7 2,545 4,076 Greater Sydney 297 138,115 128,384 Rest of New South Wales 171 45,937 55,668 Total New South Wales 468 184,052 184,052 Source: Non-government School Census (unpublished), * Students are counted based on the location of the campus of the school they are enrolled in. ** Estimates by place of usual residence for the Capital Region should be interpreted with caution. In 2013, there were an estimated 1,300 students who lived in the Capital Region and attended independent schools in the ACT. 1.1.4 School size The number of students enrolled in each NSW independent school ranges from less than 10 to over 2,000. In 2013, around 100 independent schools enrolled less than 100 students, while approximately 50 enrolled more than 1,000 students. The majority of larger schools enrol both primary and secondary students (that is, combined), although there are some larger schools enrolling secondary students only. The distribution of school sizes is shown in Chart 1.2 below. 8

Chart 1.2: NSW independent schools, by number of students - 2013 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Less than 50 50 to <100 100 to <150 150 to <200 200 to <250 250 to <500 500 to <750 750 to <1,000 Source: Non-government School Census (unpublished), 1,000+ 1.1.5 Market share The share of independent school students as a proportion of total students differs across the regions. At the State level, the share of students enrolled in independent schools is approximately 15.9%, although it ranges from around 10% in Far West and Orana, through to 40% in Sydney Eastern Suburbs. Chart 1.3: Independent school students as a share of total students by region, 2013 Source: Note: Capital Region calculations include only students enrolled in NSW independent schools. A significant number of students living in the Capital Region attend independent schools in the ACT. The market share (or proportion of total school students enrolled in independent schools) differs across primary and secondary schools for each region. In total, independent schools Capital Region Far West and Orana Riverina Central West Illawarra Sydney - Sutherland Mid North Coast Sydney - Parramatta Sydney - Blacktown Rest of New South Wales Sydney - South West Hunter Valley exc Newcastle Central Coast New England and North West Sydney - Outer South West Newcastle and Lake Macquarie Richmond - Tweed Sydney - City and Inner South Total New South Wales Murray Coffs Harbour - Grafton Sydney - Inner South West Sydney - Outer West and Blue Mountains Sydney - Ryde Greater Sydney Southern Highlands and Shoalhaven Sydney - Inner West Sydney - Northern Beaches Sydney - Baulkham Hills and Hawkesbury Sydney - North Sydney and Hornsby Sydney - Eastern Suburbs 0% 10% 20% 30% 40% 50% 9

in the Greater Sydney area hold a 13.7% share of the primary school market, and a 24.4% share of the secondary school market. For the rest of NSW, independent schools enrol 10.3% of primary students and 17.4% of all secondary students. Chart 1.4: Independent school students as a share of primary 1, secondary 2 and total students, by region 2013 60% 50% Primary Secondary Total 40% 30% 20% 10% 0% Capital Region Central Coast Central West Coffs Harbour - Grafton Far West and Orana Hunter Valley exc Newcastle Illawarra Mid North Coast Murray New England and North West Newcastle and Lake Macquarie Richmond - Tweed Riverina Southern Highlands and Shoalhaven Source: Note: Capital Region calculations include only students enrolled in NSW independent schools. A significant number of students living in the Capital Region attend independent schools in the ACT. Sydney - Baulkham Hills and Hawkesbury Sydney - Blacktown Sydney - City and Inner South Sydney - Eastern Suburbs Sydney - Inner South West Sydney - Inner West Sydney - North Sydney and Hornsby Sydney - Northern Beaches Sydney - Outer South West Sydney - Outer West and Blue Mountains Sydney - Parramatta Sydney - Ryde Sydney - South West Sydney - Sutherland New South Wales Greater Sydney Rest of New South Wales 1 Calculated as the number of students aged 12 years and below. 2 Calculated as the number of students aged 13 years and above. 10

2 Economic and demographic conditions and projections 2.1 New South Wales economic conditions NSW is the largest State economy within Australia, and Sydney is the nation s largest city. With a population of 7.5 million and a nominal Gross State Product (GSP) of $494.3 million during 2013-14, NSW comprises close to one-third of the entire Australian economy. The NSW economy has recorded solid rates of economic growth over time. However, the recent performance of the State has been more modest when compared to the rest of the nation. As Chart 2.1 shows, real output growth remained on par with Australia through the 1990s, with a period of softer relative economic growth evident from 2000, and a smaller negative lingering through the global financial crisis. Chart 2.1: Real output growth, NSW and Australia 6% 5% Change on year earlier 4% 3% 2% 1% 0% -1% -2% 1990 1994 1998 2002 2006 2010 2014 NSW Australia Source: Australian Bureau of Statistics, In particular, the passing of the Sydney Olympic Games and the end of strong rates of growth in information technology and advertising from 2000-01 initiated a period of relatively slower growth in NSW. Other developments were also relevant, including: A house price boom in Sydney in the early 2000s reduced the attractiveness of the State as a base for many individuals and businesses, reducing population growth and relative economic growth. The global industrial commodity boom from 2005 benefited States such as Western Australia and Queensland to a larger extent than NSW, and also generated a rise in the 11

value of the $A, which harmed a number of the State s important industries such as tourism. A series of droughts began in 2002-03, diminishing agricultural production in the State s west. Increases in official interest rates over the two years to mid-2008 had a relatively larger impact in NSW compared to other areas of Australia given the higher levels of household debt in the State. The global financial crisis also had a more pronounced impact in NSW given that Sydney is the base for a large proportion of Australia s financial sector. The impact of the challenges is clear when considering the State s performance in relative terms. As Chart 2.2 shows, the State has accounted for a falling share of Australia s population and economy for over a decade. Chart 2.2: NSW share of national totals Share of national total 36% 35% 34% 33% Output Population 32% 31% 30% 1989-90 1993-94 1997-98 2001-02 2005-06 2009-10 2013-14 Source: Australian Bureau of Statistics, 2.1.1 New South Wales employment growth Total employment across NSW is expected to increase from around 3.6 million persons in 2013-14 to 5.3 million by 2049-50. Employment growth in NSW had fallen behind Australia over most of the last decade prior to the global financial crisis. In 2011-12, NSW employment growth reached nearly its lowest point since 1996, of 0.65%. From this, the annual employment growth rate is forecast to reach a high of 1.6% in 2019-20, before moderating to an average of around 1.2% over the medium term, and 1.0% over the long term. This reflects a decline in both the population growth rate and the labour force participation rate over the period due to population ageing. The NSW unemployment rate is projected to trend around 5.6% in the short term before reaching a long run rate of around 5.1%. 12

Chart 2.3 shows forecast employment growth across selected occupations. Consistent with the expected growth of services sector employment over the next two decades, managers and professionals are expected to lead growth in NSW employment. Chart 2.3: NSW Employment across selected occupations Change on year earlier 8.0% 7.0% Forecast 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2002-03 2009-10 2016-17 2023-24 2031-32 2039-40 2046-47 -1.0% -2.0% Managers Professionals Other occupations Source: Australian Bureau of Statistics, Occupations that are forecast to experience the highest rates of future employment growth are Community and Personal Service Workers (2.05% average annual growth over the next 20 years), Professionals (1.95%) and Managers (1.08%). Population growth and an ageing demographic will drive growth in Community and Professional Service Workers. 2.1.2 Regional employment growth Employment growth rates are expected to vary across statistical regions within NSW. Over the next 20 years to 2033, average annual employment growth is expected to range from 2.25% in Sydney North Sydney and Hornsby, down to -1.25% in Far and West Orana. In the case of Far West and Orana, the fall in employment is driven by a declining labour force participation rate (from 62.4% in 2013 to 52.1% by 2033), as the population ages and fails to be replenished. Regional employment across NSW is an important driver underpinning education demand, in particular demand for non-government education. Growth in employment implies growing incomes, which in turn underpins household spending. At a more granular level, our research suggests that there will be a greater demand for non-government education in areas where employment growth in occupations such as professional and managers is strongest. In general, the areas with the strongest overall employment growth also represent the areas with the strongest growth in these occupations. 13

Table 2.1: Projected employment growth by region, NSW 2013 to 2033 2013 2023 2033 Growth* Capital Region 110,726 115,016 127,459 0.71% Central Coast 149,899 165,429 179,589 0.91% Central West 97,330 111,175 120,267 1.06% Coffs Harbour Grafton 58,900 60,206 61,103 0.18% Far West and Orana 56,214 48,655 43,684-1.25% Hunter Valley exc Newcastle 126,969 147,588 171,335 1.51% Illawarra 130,227 146,201 158,936 1.00% Mid North Coast 76,004 81,570 82,482 0.41% Murray 56,640 49,054 44,626-1.18% New England and North West 83,732 88,908 93,202 0.54% Newcastle and Lake Macquarie 173,237 194,649 217,356 1.14% Richmond Tweed 104,740 105,277 101,326-0.17% Riverina 78,079 82,974 81,495 0.21% Southern Highlands and Shoalhaven 59,992 63,874 63,917 0.32% Sydney Baulkham Hills and Hawkesbury 120,270 135,113 141,726 0.82% Sydney Blacktown 157,647 184,928 215,474 1.57% Sydney City and Inner South 188,613 231,669 292,930 2.23% Sydney Eastern Suburbs 151,491 189,716 234,868 2.22% Sydney Inner South West 256,054 299,830 344,266 1.49% Sydney Inner West 160,127 188,161 223,076 1.67% Sydney North Sydney and Hornsby 221,434 275,667 345,569 2.25% Sydney Northern Beaches 140,625 161,028 187,878 1.46% Sydney Outer South West 123,301 138,486 146,128 0.85% Sydney Outer West and Blue Mountains 157,211 161,397 157,446 0.01% Sydney Parramatta 196,841 246,894 306,008 2.23% Sydney Ryde 88,200 107,296 125,047 1.76% Sydney South West 162,208 178,966 188,205 0.75% Sydney Sutherland 123,760 125,176 125,940 0.09% Total 3,610,474 4,084,904 4,581,338 1.20% Source: Australian Bureau of Statistics, * Average annual growth rate, 2013 to 2033 2.2 New South Wales population backdrop Since European settlement began in 1788, the State of NSW has continued to attract a large share of the total Australian population. At the time of Federation in 1901, the population of NSW accounted for over 36% of the total Australian population. During the first half of the twentieth century its growth outpaced the rest of the nation. From the peak in the early 1940s, the growth of the NSW population relative to the rest of Australia began to fall, reaching equivalent growth in the early 1970s. The growth of the NSW population has largely fluctuated over the years due to migration. In general, migration levels tend to fluctuate more than natural increase (births minus deaths), and are therefore more difficult to forecast. The age structure of the NSW population is an important contributor to the demand for school-level education. Compared to Australia, there are relatively fewer people aged 45-49 years and younger, and relatively more in the older age brackets (50-54 and over) in NSW. 14

This is illustrated in the population pyramid shown in Chart 2.4, which shows the proportion of the population in each age bracket by sex in 2013 for both Australia and NSW. Chart 2.4: Population by age and sex, Australia and NSW June 2013 Australia New South Wales Males 100+ 95-99 Females Australia New South Wales 90-94 85-89 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 4 3 2 1 0 per cent Source: Australian Bureau of Statistics, 0-4 0 1 2 3 4 per cent There were approximately 1.29 million children aged 5 to 18 years living in NSW in June 2013. This was an increase of 0.9% on the previous year, and was 7.3% higher than ten years earlier. There have been several declines in the absolute number of school-aged children living in NSW over recent decades. The most recent decline was between 2002 and 2010, when the population aged 5 to 18 years fell from 1.257 million in 2002, to 1.249 million in 2005, before growing to 1.260 million by 2011. This fall in absolute population of school-aged children was predominately driven by lower fertility rates (and hence lower births) during the late 1990s. The recent increases in the school-aged population have been driven by increases in the number of births in the years 2006, 2007 and 2008. The impact has been large. In 2004 there were 82,000 births in NSW, but that had risen to 98,000 by 2013. That alone means that the speed of the gain over the first decade of these projections is underpinned by a lift in birth rates since the middle of last decade. This lift in birth rates has been associated with a tempo change in fertility that is, a period where the pattern of fertility changes. In this instance, the increase in birth rates was the effect of cohorts of women who have delayed having children catching up in the subsequent years. 15

Overall, we expect NSW to follow a relatively similar path to Australia in terms of future population growth, with a relatively stable fertility rate, increasing life expectancy, and increases in the number of net overseas migrants. The assumptions made by Deloitte Access Economics for components of population growth (fertility, mortality and migration) are shown in Table 2.2 below. Table 2.2: Key demographic assumptions Fertility Mortality Net Overseas Migration Net Interstate Migration Source: New South Wales Total fertility rate (TFR) declines to 1.822 births per woman by 2036, and then remains unchanged over the forecast period. Life expectancy increases to 84.7 years for males and 87.9 years for females by 2053. Steadily increases from around 67,000 per year in 2013, to 94,700 in 2053. Remains negative over the forecast period, increasing from -14,600 in 2013 to -35,300 in 2053. Australia Total fertility rate (TFR) declines to 1.800 births per woman by 2025, and then remains unchanged over the forecast period. Life expectancy increases to 84.7 years for males and 87.9 years for females by 2053. Increases from around 242,800 per year in 2013, to 315,700 per year in 2053. Not applicable 2.2.1 Future population growth The population outlook, consistent with that published in Business Outlook publication (June 2014), is that the population of NSW will continue to grow, reaching 11.1 million people by 2053. The population is expected to grow by an average of 1.0% per year, although year on year growth will slow to around 0.9% by the end of the projection period. Population growth in NSW is expected to continue to be primarily driven by net overseas migration, with expectations that there will be around 94,000 net overseas migrants per year into NSW by 2053. Although the number of births is expected to continue to rise steadily (the result of a growing population rather than an increase in birth rates) these increases will largely be offset by the growing number of annual deaths as the population ages. Overall, natural increase (births minus deaths) will account for less than 40,000 of the annual population increase by 2053. The rate of population growth in Greater Sydney (1.2%) is expected to be significantly greater than that in the rest of the State (0.7%). 16

Chart 2.5: Projected NSW population growth, 2013 to 2053 160 140 120 100 80 60 40 20 0-20 Change on year earlier ('000s) Change on year earlier (%) 2.0% 1.5% 1.0% 0.5% 0.0% -40-0.5% 2013 2023 2033 2043 2053 Natural increase Net international migration Net interstate migration Population growth (RHS) Source: Given that future population growth in NSW will largely be driven by overseas migration, and that 5-19 year olds accounted for just 10.3% of net migrants into NSW during 2013, it is not unexpected that the rate of population growth for school-aged children is less than for the total population for much of the projection period. Over the projection period, the 5-18 year old population of NSW is expected to grow by an average of 0.7% per year (compared with 1.0% for the total population). Although the school-aged population in Greater Sydney is also expected to grow at a faster average rate than the rest of the State (0.8% compared with 0.6%), the difference is not nearly as pronounced as for the total population. This is largely a result of the higher fertility rates typically recorded in regional areas compared with the major cities. 17

Chart 2.6: Projected NSW population growth, 5-18 years age group, 2013 to 2053 2.0 1.5 Population aged 5-18 years (million) Year on year growth (%) 1.4% 1.2% 1.0% 1.0 0.8% 0.6% 0.5 0.4% 0.2% Source: 2.2.2 Regional population growth Population projections for the 28 Statistical Regions in NSW to 2053, along with average annual growth over the 40 years of the projection period for the population aged 5 to 18 years are presented in Table 2.3. The population growth rate of regions within NSW is relatively diverse. While the fastest growing regions are typically located in Sydney, many located in regional NSW are expected to experience low (or even negative) population growth over the next 40 years. Overall, the population of Greater Sydney is expected to grow at a rate of almost double the remainder of the State (1.21% compared with 0.66%). The region expected to grow at the fastest rate over the period is Sydney City and Inner South (1.93%). Despite have a relatively lower birth rate that the State average, the area is constantly being boosted by positive net flow of migrants from overseas, interstate, and elsewhere within the State. The growth in this region is also partially reflective of the continuation of urban renewal plans for the area. Sydney City and Inner South is also expected to have the highest annual average growth rate over the next 40 years for the 5 to 18 year cohort (1.31%), which is noticeably slower than the total population growth rate in the area (1.93%). It is also important to note, however, that the 5 to 18 year age group consist of just 7.5% of the total population in Sydney City and Inner South, which is significantly lower than any other region in the State. In contrast, 20.6% of the population in Sydney Blacktown is aged between 5-18 years. Overall, there are no regions in NSW where the school aged population is expected to fall in absolute numbers; however there are some regions which are expected to experience higher growth rates in their 5 to 18 year cohorts than for the total population. This includes 0.0 0.0% 2013 2023 2033 2043 2053 18

the region of Far West and Orana, which is expected to have an overall negative average annual growth rate over the projection period (-0.32%) and a positive growth rate for the school-aged population (0.40%). Table 2.3: Regional population projections, 5 to 18 years, 000s 2013 2023 2033 2043 2053 Growth* Capital Region 39.6 45.5 50.4 53.3 57.8 0.95% Central Coast 59.3 62.5 65.6 68.9 74.6 0.57% Central West 40.3 43.6 46.1 48.5 52.5 0.67% Coffs Harbour Grafton 24.8 25.9 27.3 28.9 31.4 0.59% Far West and Orana 22.8 22.8 23.7 24.6 26.7 0.40% Hunter Valley (excluding Newcastle) 49.6 55.4 58.9 62.3 67.5 0.77% Illawarra 51.7 54.8 57.8 61.0 66.1 0.61% Mid North Coast 36.5 38.6 40.8 43.2 46.8 0.63% Murray 20.7 20.2 20.8 21.7 23.4 0.31% New England and North West 35.7 38.6 40.7 42.9 46.5 0.67% Newcastle and Lake Macquarie 59.8 63.4 66.9 70.6 76.6 0.62% Richmond Tweed 42.3 44.2 46.3 48.8 52.9 0.56% Riverina 30.7 30.9 31.9 33.3 36.1 0.40% Southern Highlands and Shoalhaven 25.4 26.2 27.5 28.9 31.2 0.52% Sydney Baulkham Hills and Hawkesbury 45.7 48.1 50.5 53.6 58.2 0.60% Sydney Blacktown 67.4 75.9 79.7 83.7 90.8 0.75% Sydney City and Inner South 22.2 29.9 32.2 34.1 37.3 1.31% Sydney Eastern Suburbs 34.0 44.7 47.6 50.6 55.2 1.22% Sydney Inner South West 95.9 109.5 115.3 121.6 132.2 0.81% Sydney Inner West 37.9 48.5 51.5 54.4 59.3 1.13% Sydney North Sydney and Hornsby 68.3 82.7 87.1 92.6 100.9 0.98% Sydney Northern Beaches 44.9 55.0 57.9 60.9 66.3 0.98% Sydney Outer South West 51.5 54.0 56.4 59.1 63.9 0.54% Sydney Outer West and Blue Mountains 57.5 58.6 61.2 63.9 69.0 0.46% Sydney Parramatta 72.4 89.2 94.6 100.0 109.0 1.03% Sydney Ryde 27.4 31.2 33.0 35.0 38.1 0.83% Sydney South West 77.8 80.0 83.0 87.0 94.2 0.48% Sydney Sutherland 38.0 41.3 43.3 45.5 49.3 0.65% Greater Sydney 800.3 911.2 958.9 1,010.9 1,098.4 0.79% Rest of New South Wales 479.9 510.1 539.1 568.0 615.5 0.62% New South Wales 1,280.2 1,421.3 1,498.0 1,578.9 1,713.9 0.73% Source: Australian Bureau of Statistics, * Average annual growth rate, 2013 to 2053 19

3 Future demand for independent schools 3.1 NSW future demand projects total demand for independent schools in NSW to increase from 184,100 students in 2013 to 257,700 in 2053. This equates to an average annual growth rate of 0.85% per year. The increase in demand is driven by both an increase in the population of school-aged cohorts, as well as a shift in the occupational profile towards higher skilled occupations (and, by proxy, higher education levels and incomes) over the period. Overall, the share of independent school students as a proportion of total students in NSW is anticipated to rise from 15.9% to 16.6% over the next 40 years. This future level of demand, which is unconstrained by the availability of enrolment places, represents a total increase of 40% on current enrolments. This equates to approximately 74,000 students in addition to current numbers. Chart 3.1: Projected independent school enrolments, by sex 300,000 250,000 200,000 150,000 100,000 50,000 Source: 0 2013 2023 2033 2043 2053 3.1.1 Results by age Males Females Persons Overall, demand at ages typically associated with secondary school (i.e. 13 to 18 years) is expected to increase at a slightly higher rate than for the younger ages. Over the forty years, demand at the secondary school level is expected to increase by an average annual growth rate of 0.88%, compared with 0.81% for primary schools. 20

Table 3.1: Projected independent school enrolments by age, persons Persons 2013 2023 2033 2043 2053 Growth* 4 years 231 248 261 282 308 0.72% 5 years 7,530 8,191 8,571 9,210 10,111 0.74% 6 years 10,210 11,104 11,650 12,467 13,691 0.74% 7 years 9,827 10,692 11,267 12,029 13,210 0.74% 8 years 10,158 11,400 11,927 12,709 13,939 0.79% 9 years 10,208 11,651 12,369 13,006 14,238 0.84% 10 years 11,439 13,703 14,000 14,724 16,088 0.86% 11 years 11,955 14,335 14,832 15,604 17,003 0.88% 12 years 17,528 20,168 21,671 22,606 24,557 0.85% 13 years 19,601 22,967 24,316 25,591 27,744 0.87% 14 years 19,058 22,289 23,736 25,127 27,157 0.89% 15 years 18,528 21,724 23,445 24,669 26,598 0.91% 16 years 17,351 19,735 21,493 22,739 24,459 0.86% 17 years 15,750 17,764 19,383 20,602 22,134 0.85% 18+ years 4,678 5,077 5,720 6,059 6,507 0.83% Total 184,052 211,048 224,641 237,424 257,744 0.85% Source:, Non-government School Census (unpublished) * Average annual growth rate, 2013 to 2053 3.2 Regional future demand Please note that regional estimates of student numbers should be interpreted with caution as regional student numbers by place of usual residence have been indirectly measured. For further information, see the Appendices. As demand for independent schools is largely a function of population growth, and population differs across regions, it is not unexpected that the regions display significant variations in outcomes. Over the next 40 years, each region in NSW is expected to experience an increase in demand for independent school enrolments. Average annual growth over the period ranges from 1.55% in Sydney City and Inner South, to 0.27% in the Murray statistical region. More generally, the strongest enrolment growth is expected to occur within the broader Sydney region, with annual average growth of 0.92% in Greater Sydney compared with 0.61% in regional NSW. This difference is predominately due to the slower overall growth in both the total population and school-aged population in regional areas of the State. As a result, the proportion of independent students in NSW is expected to shift further to the metropolitan areas, with the Greater Sydney area being home to 71.8% of independent students by 2053 (up from 69.1% in 2013). Projections on a ten-yearly basis are shown for each of the regions below. For further detail, including projections by age and sex for each region, please see the Excel Tool accompanying this report. 21

Table 3.2: Projected demand for independent schools by region, NSW 2013 to 2053 Region 2013 2023 2033 2043 2053 Growth * Capital Region 2,947 3,362 3,830 4,043 4,366 0.99% Central Coast 7,122 7,489 7,906 8,309 8,986 0.58% Central West 4,136 4,494 4,779 5,024 5,419 0.68% Coffs Harbour Grafton 3,567 3,737 3,975 4,213 4,573 0.62% Far West and Orana 1,954 1,954 2,033 2,110 2,277 0.38% Hunter Valley exc Newcastle 5,875 6,667 7,170 7,610 8,260 0.86% Illawarra 5,382 5,767 6,146 6,501 7,051 0.68% Mid North Coast 3,859 4,134 4,409 4,674 5,061 0.68% Murray 2,924 2,851 2,939 3,061 3,302 0.30% New England and North West 4,368 4,817 5,102 5,372 5,814 0.72% Newcastle and Lake Macquarie 7,732 8,282 8,825 9,338 10,128 0.68% Richmond Tweed 5,701 6,017 6,347 6,707 7,264 0.61% Riverina 3,078 3,091 3,212 3,339 3,597 0.39% Southern Highlands and Shoalhaven 4,146 4,285 4,520 4,742 5,114 0.53% Sydney Baulkham Hills and Hawkesbury 9,001 9,527 10,060 10,669 11,564 0.63% Sydney Blacktown 7,662 8,719 9,234 9,706 10,515 0.79% Sydney City and Inner South 3,048 4,359 4,822 5,159 5,661 1.56% Sydney Eastern Suburbs 12,348 17,024 18,404 19,612 21,417 1.39% Sydney Inner South West 13,949 16,043 16,979 17,927 19,497 0.84% Sydney Inner West 6,775 9,035 9,776 10,354 11,274 1.28% Sydney North Sydney and Hornsby 19,153 23,970 25,571 27,251 29,698 1.10% Sydney Northern Beaches 8,366 10,584 11,216 11,814 12,822 1.07% Sydney Outer South West 6,471 6,830 7,168 7,520 8,130 0.57% Sydney Outer West and Blue Mountains 8,627 8,793 9,246 9,668 10,428 0.48% Sydney Parramatta 8,157 10,235 10,969 11,626 12,678 1.11% Sydney Ryde 4,304 5,004 5,344 5,689 6,191 0.91% Sydney South West 9,318 9,537 9,965 10,464 11,339 0.49% Sydney Sutherland 4,078 4,445 4,697 4,923 5,311 0.66% Greater Sydney 128,385 151,592 161,357 170,693 185,517 0.92% Rest of New South Wales 55,667 59,458 63,280 66,732 72,225 0.65% Total New South Wales 184,052 211,048 224,641 237,424 257,744 0.85% Source: * Average annual growth rate, 2013 to 2053 In general, demand for secondary independent schools is expected to grow at a faster rate than demand for primary independent schools in the metropolitan areas, while the reverse is true for regional NSW. For the Greater Sydney area, demand for independent schools is expected to increase by an average rate of 1.00% per year over the projection period for children aged 13 years and over (typically associated with secondary schools), while growing at an average rate of 0.84% per annum for primary schools. For regional New South Wales, demand for independent school places in primary schools is anticipated to grow by an average of 0.74% per year, compared with a 0.57% average for secondary schools. This generally reflects the different market shares, as well as different age profiles and population growth expectations. 22

3.3 Scenarios As part of this project, two alternate macroeconomic and population scenarios were developed in order to investigate the sensitivity of the projections of demand for independent schooling in New South Wales over the next 40 years. For both the population and macroeconomic scenarios, alternate higher and lower cases were considered. A comparison of results for each combination of scenario is shown below. Overall, the results range from 230,900 enrolments in 2053 under the low population growth/low macroeconomic growth scenario, through to 296,500 enrolments under a high population growth/high macroeconomic scenario. Table 3.3: Comparison projected enrolments at independent schools in 2053, alternate scenarios Macroeconomic scenario Population scenario Base High Low Base 257,744 263,919 238,886 High 289,600 296,512 268,500 Low 249,183 255,153 230,936 Source: The high population growth scenario was driven by an increase in the birth rates of the population, which will have a direct impact on the number of total school children. As a result of the higher birth rate, there are expected to be around 5.2 million births within NSW over the 40 years to 2053 (compared with around 4.7 million under the base scenario). The low population growth scenario was due to lower net interstate migration into the State. Although the number of school children is lower than under the base scenario, the impact is less direct on school children as migration is experienced across all age groups. The high macroeconomic growth scenario forecasts a lower unemployment rate and increasing shift of the occupational profile towards higher skilled occupations. Conversely, the low macroeconomic growth scenario forecasts a higher unemployment rate, and a shift in occupational profile towards what was experienced in NSW in around 2001. At the regional level, the different scenarios have different impacts depending on the current and future population and economic structure of the area. Results for regional areas under each of these scenarios are available in the Excel Tool accompanying this report. 23

Appendix A: Methodology The forecast model used is estimated using a multi-step process. At the broadest level, relationships (in the form of proportions) were estimated for: (1) the total population aged 4 to 20 years, (2) the total number of students, and (3) the total number of independent school students. To do this, relationships between both the population and total students, and independent students and total students were established in the form of proportions. At the State level, the total share of Independent student enrolments was estimated to be 15.9%, with the highest shares recorded for ages associated with secondary schools (that is, 13 to 18 years). These shares form the basis of each of the demand model types. For the current share model, these are held constant, whereas for the index-driven model they are adjusted by a relationship established between the Index of Education and Occupation and the share of independent students as a proportion of total students. Population and employment projections Population and employment projections are based on in-house demographic and macroeconomic forecasting models, with State results consistent with those published in the June 2014 Business Outlook publication. Population and employment projections at the SA4 level are constrained by projections at the State level, and are based on the historical shares and ratios of their population and economic components. Calculation of education and occupation index Using the concept of the Index of Education and Occupation (IEO) score, we derived a similar index using occupational skill level, unemployment and education levels at the SA4 level based on 2011 Census data. Given that the ABS does not publish indexes at the SA4 level, we were unable to recreate an exact published number, but, rather, used the concept of the Index. A key variable contributing to the index is skill level. This is incorporated into the index by attributing weights to the proportion of the employed population working in occupations associated with five different skills levels. In the absence of specific educational attainment forecasts, these were allowed to change over time at the same rate as employment in the relevant occupations. For example, if the share of people in a region employed in occupations associated with the lowest skill level (i.e. Skill Level 5) fell from 20% to 19% (it was assumed that the share of people with no year 12 education in the region would also fall by this amount but from a different base, and with the associated coefficient as established by the ABS in their IEO measure. While the actual index number does not represent any particular variable, we used the movement in this index to inform our demand model. This is based on the key assumption 24

that the types of households who will seek to enrol their children in independent schools in the future have the same (or similar) characteristics as those who currently enrol their children in independent schools. Within the forecast model, an increase in the index measure will increase the share of the student population anticipated to enrol in independent schools (under the key assumption that the same types of households who currently enrol their children in independent schools will continue to do so in the future); and an increase in the index is essentially forecasting an increase in these household types. 25

A note on SA4 independent school numbers Regional estimates of student numbers should be interpreted with caution as they have not been directly measured. As Non-government School Census data is on a place of education basis, and we are estimating demand on a place of usual residence basis, the following process was undertaken to estimate 2013 independent school student enrolments by place of usual residence: 2011 Census enrolments in other non-government schools by SA4 region were adjusted to account for not stated responses. These were allocated based on the share of other non-government schools as a proportion of all students, by age, sex and region. These adjusted enrolments were summed to State totals, by age and sex; then a further small adjustment was made to ensure that the sum of other non-government school enrolments derived from the 2011 Census matched the number of other non-government school enrolments in the Schools, Australia publication for 2011. In light of no direct measures available, independent Catholic enrolments (based on Non-government School Census data) were distributed by region based on the share of each SA4 region s total Catholic school enrolments, by age and sex. It should be noted that this implies that the geographic distribution of student enrolments in independent Catholic schools is consistent with the distribution of total Catholic enrolments (which is unlikely to be exactly correct). Enrolments in independent Catholic schools were added to those for other non-government schools to derive total independent school enrolments for 2011. Using the shares based on the 2011 Census, the Non-government School Census and Schools, Australia data, the 2013 enrolment data was distributed by SA4 region across the State. A similar process, using 2011 Census shares, was used to derive total school enrolments for New South Wales in 2013 by SA4 region (i.e. to disaggregate published New South Wales totals in Schools, Australia). This number was compared with the population of each SA4 region (by age and sex) to determine the ratio of enrolled students to population by each age and sex. The ratio between students and population was then assumed to be constant across the projection period. 26

Appendix B: Regional classification Projections for this report have been conducted using the Statistical Area Level 4 structure as defined in the Australian Bureau of Statistics Australian Statistical Geography Standard (ASGS). The ABS encourages the use of this standard statistical geography in order to facilitate the comparability of statistics, particularly over time. Statistical Area Levels 4 (SA4s) areas are largely designed to reflect labour markets within each State and Territory. SA4s typically included a minimum of 100,000 persons (although there are some exceptions in rural areas) and are named according to the areas they represent. There are a total of 30 SA4 regions in NSW, including 14 in Sydney, 14 in the remainder of NSW and 2 special purpose codes. The two special purpose codes will be excluded from this analysis. The boundaries of the SA4 regions are shown in the figures below. Figure B.1: SA4 regions, New South Wales Source: Australian Bureau of Statistics, 27

Figure B.2: SA4 Regions, Sydney Source: Australian Bureau of Statistics, 28