Grace Pletas dropped out of school early, saying she should have been offered more flexible study options. Photo: Penny Stephens

One in four Australian students fails to complete a year 12 certificate or vocational equivalent, and nearly 30 per cent of year 7 students are falling behind international benchmarks in reading.

A landmark national study by education policy think tank the Mitchell Institute has also exposed an alarming discrepancy between advantaged and disadvantaged students, and warns the gaps are widening in a “segregated” system that leaves poorer students behind.

The Educational Opportunity in Australia 2015 report, which was released on Monday, has found a staggering 26 per cent of Australian 19-year-olds, or 81,199 people, are not finishing school.

In NSW, 27 per cent (26,535 people) dropped out, while 23 per cent of Victorian 19-year-olds (17,886 people) did not complete year 12 or an equivalent.

About 40 per cent of Australia’s poorest 19-year-olds are leaving school early, compared with about 10 per cent of the wealthiest.

Most socially disadvantaged students attend government schools (77.5 per cent), yet total government expenditure on private schools increased 107 per cent between 1991 and 2000.

This was more than twice the growth in funding for state schools, at 52 per cent, and far outstripped growth in enrolments.

The report’s lead author, Professor Stephen Lamb, said the the effects of student disadvantage were strong in Australia compared with Canada and New Zealand.

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Source: Quarter of Australian Students Drop Out, New Report Reveals I The Age National