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A couple of times each year, usually in January and September, the Fairfax press in Australia makes a big deal about private school fees. Newspaper articles invariably list the schools with the highest increases in fees, note that the fee increases are greater than inflation, and point out that these schools receive government funding.

This year was no exception. The Sydney Morning Herald and The Age ran articles stating that tuition fees in some private schools in Australia will next year reach $20,000. This applies to only a handful of schools, but there are a substantial number of schools with tuition fees above $15,000 a year.

This is an enormous amount of money. It is net of tax and is for tuition alone. You could reasonably add another couple of thousand dollars for building funds, school uniforms, excursions, laptop computers, and other non-optional items. As one parent put it: “It used to be that parents slaved to pay off the mortgage, but the fact is that mortgage repayments are truly petty cash alongside this stuff. With two kids costing $20,000 each and a third at $18,000 – all after tax – plus trips, books, uniforms, sports, you have to earn $140,000 before getting out of bed.”

A little background on school funding in Australia might be helpful at this point. There are two school sectors in Australia: government and non-government (private). Government schools are fully government funded and cannot charge compulsory fees.

The non-government sector consists of Catholic systemic schools and independent schools. Catholic systemic schools receive around 80 per cent of their funding from government sources and the remainder is from fees which are set by their archdiocese. Their total funding level is similar to government schools.

Independent schools receive some government funding – between 10 and 70 per cent of their income – which is allocated on an individual basis. They are free to determine their own fees.

The private schools that hit the headlines each year are always independent schools. Some of these schools have facilities that shout extravagance, like rifle ranges and Olympic swimming pools. They represent a tiny proportion of the total number of independent schools, but the flagrant wealth of some of these schools is used as a blunt weapon to bludgeon the funding of all non-government schools.

There are two sides to the story, of course. Independent schools have to charge fees. Their government funding is insufficient to offer an adequate, let alone a quality education. And, as educators of the Australian public, their entitlement to government support is inarguable.

Most non-government schools charge modest fees. The pertinent question is why do some schools charge so much? When the average per capita cost of schooling in both the public and non-government sectors is around $10,000, why do some schools need per capita incomes of more than twice that amount? They may receive a relatively small amount of government funding, but it’s a bit rich for these schools to cry poor.

Spokespeople for independent schools have offered a variety of explanations. The Association of Independent Schools of Victoria recently pointed to the fact that the consumer price index (CPI) for education is higher than the general CPI. This is a fallacious argument. Increasing school fees are one of the causes of high CPIs, not the other way around. Some heads of independent schools, including Barker College in Sydney, have said the increases are necessary because “to offer the very best education there has to be a corresponding cost, and we want to give our parents the very best.”

For those of us who believe in school choice, in the freedom of parents to invest in their children’s education and the freedom of schools to provide the services desired by parents and students, the issue of high fees presents a bit of a quandary. On the one hand, we don’t want undue government interference in the affairs of independent schools. One the other hand, high fees reduce choice and undermine community support for the principle of government funding for independent schools.

But the real reasons for high and increasing fees make the position somewhat clearer.

The first reason is straightforward. The largest single expenditure item for schools is teacher salaries. With a national shortage of highly qualified teachers, particularly of maths and science, there is strong competition. Free of the constraints of the public school industrial system, independent schools pay more to get the best teachers and this cost is reflected in fees.

The second reason is that many independent schools, being responsible for their own buildings and facilities, have sunk large amounts of money into in capital works. Some schools are millions of dollars in debt and rely on fees to service these debts as well as cover their running costs.

The third reason is that the education market allows schools to charge high fees. Most of the high fee schools have long waiting lists. At some point, fee levels will presumably hit a ceiling but until then elite schools will charge as much as people are willing to pay. Why parents are willing to pay $20,000 a year for school is the critical issue.

There will always be a certain number of people for whom schooling is a status symbol and money is of no concern. But for most Australian families, school fees are not easy to come by and are seen as an investment. There is so little comparative, quantitative information available about schools that many zealous parents use price as an indicator of quality. If more information were available about school performance, parents would be able to more accurately decide whether $20,000 is really buying a quality education or just lavish facilities. A poorly informed market impedes competition and allows inflated prices.

The fourth reason is instability in government funding. Non-governments schools are in fact heavily dependent on federal government funding. They exist in fear that the election of a Labour government will see their funding substantially decreased. The executive director of the NSW Catholic Education Commission has said that “quite a few” schools have been lifting their fees to create cash reserves in case funding arrangements change in the future.

Australia has a quasi-market in school education that is less efficient and less effective than it should be. We need a proper market. All schools should be funded on a per-student basis that is not subject to political whim. Parents need to be able to make informed choices. If they still want to spend their hard-earned cash on performing arts centres, rifle ranges and Olympic swimming pools then so be it.

Jennifer Buckingham is a research fellow at The Centre for Independent Studies in Sydney, New South Wales, Australia.