Who gets the slots available in a course is dictated by the students' results in the final exams in high school. (This is approximately true: in NSW several exams before the end of high school also count. Some universities will offer places based on the "other" high school exams if they can predict what your final exam result will be with sufficient accuracy.)
The student with the highest marks gets the place they want, and then the next student down gets their first preference, unless it is full, in which case they get their second, third, fourth, preference. And so on down through all the student candidature.
Theoretically this whole system should let a sufficiently capable average income student study humanities (or whatever they want).
In practice there are problems -- some schools have teachers who are very good at getting good marks for their students in the final exam; actually being intelligent and creative doesn't really help as much as it should -- but it's not an overly terrible system.
It's a reduction of subsidies, to maximise the government's ROI.
Plus, you still get a tax-free (although indexed) loan. If you want to do arts and/or humanities, you definitely can. Your loan, which you don't pay a cent of until a certain salary, and then only a percentage of your salary after that, will just be larger.
Except, weirdly, the reduction in subsidy is less than the increase in fees, so institutions will get more money (fees + subsidy) for the not-job-ready degrees, while getting less for the job-ready degrees. Which makes no sense at all.
One way to think about this is as a "disincentive to study job-relevant fields".
But another way to look at this is further entrenching the reality that only the wealthy and privileged can afford to be less vocational in their thinking about college.
I'm not sure the outcome here is great.
Isn't that perfectly reasonable? If you have the means to study as a hobby, then you should be able to enjoy that. If you haven't yet got the means for that, then earn it and maybe your children can do an arts degree off the back of your engineer's salary or you can do it yourself when you retire. The whole point of the government subsidizing education is to create useful workers that give more back to society with their useful work. Not to indulge people's pseudo-intellectual pleasures.
It's not as if arts degrees make people somehow superior at understanding society and arts and culture. Those are things anybody can pick up even with no formal education. Understanding the scientific method, statistics and critical thinking would go further in making well rounded useful thinkers than knowing what some ancient person's opinion about his local society was or training to become an activist who refuses to allow themselves to think objectively.
Many topics in maths and engineering are very intuitive to pick without formal education. To understand Humanities requires discussion with others. Writing and getting feed back on a lot of essays, listening to and explaining ideas in seminars, testing out an idea in a lecture. It can take a decade to start to understand someone like Foucault. It's hard to find a community of specialised discussion outside of formal education. Just picking up humanities from a few youtube videos or whatever is what I am convinced has led us to the kind of unobjective activism that is reacted against so much recently.
This is why years ago I watched the humanities students struggle endlessly with their first year statistics unit. The incredibly simple, first year statistics unit.