Pearls and Irritations

The changes to Tertiary Education funding announced by the Prime Minister last weekend, mostly benefit former students. Arguably there are other higher priorities to restore the funding of higher education and remove anomalies in the fees charged.

Last week started badly for Albanese with allegations about his Qantas upgrades, which he took too long to adequately answer. However, by the end of the week Albanese was seeking to seize the initiative and change the debate with announcements about tertiary education funding.

In short, the Government pledged to:

• Make student loan repayments fairer by reducing the amount that people with a student debt will have to repay each year by lifting the minimum repayment threshold from around $54,00o to $67,000 starting in 2025-26. Also, in future former students will only be levied on their income above their threshold, whereas previously an increase of $1 above the threshold resulted in a massive increase in loan repayments which was a major disincentive to earn more for someone whose income is just above the threshold. For someone earning $70,000 this will mean that in future their repayments will be around $1,300 less per year.
• From 1 July next year 20 per cent will be cut off all student debt, which represents a cut of around $16 bn in debt, and will reduce the average individual HELP debt of $27,600 by around $5,500.
• Extend the present fee-free TAFE, which has delivered 180,000 Fee-Free TAFE places in 2023, and 300,000 places over the three years from 2024, by funding another 100,000 places a year from 2027.

In addition, the Government had previously announced reforms to indexation that will mean that student debts cannot rise faster than average wages, and usually less.

Overall, the main purpose of these various announcements is to reduce the cost of debt repayment for former students to help ease their cost of living. The immediate response of the Opposition education spokesman, Simon Birmingham, was that these changes represented a “cash splash” and he questioned how the Government will be able to fund the changes in repayments.

In determining who is right – the Government or the Opposition – our starting point should be that any change in student charging and debt collection inevitably comes at a cost to other competing priorities for government funding. In particular, we need to consider the merits of these announcements against other alternative demands for tertiary education funding.

On that basis I am happy to conclude that the first of these policy changes – to make student loan payments fairer – should be supported. It was a recommendation of the Australian Universities Accord, and this change will correct an anomaly in the original design of HECS, as has been recognised by its original designer, Bruce Chapman.

I am sorry to say, however, that I agree with the Opposition that the priority for reducing student debt or extending fee-free TAFE places is questionable.

The fundamental principle underpinning the HELP scheme, which requires tertiary students to contribute to the cost of their education where they can, is that students with a tertiary qualification can typically expect to earn more than the rest of the community. To the extent that this additional earning occurs then it is only fair that people with a tertiary qualification make a contribution to paying for the cost of their tertiary education, rather than pass all the burden to their fellow taxpayers, many of whom have not benefited from having a tertiary qualification.

Accordingly, the case for this additional assistance announced by the Government to former students is not strong. Similarly, it is not obvious why some tradies should gain their qualification for free. No evidence has been provided that this is an effective way of beating possible future shortages of workers in the selected trades.

On the other hand, in the case of higher education, most people involved are agreed that one of the highest priorities is to reduce the ridiculously high fees introduced by the Morrison Government for people studying in the humanities. These students are paying a much higher proportion of the cost of their university education than say engineers or doctors, and there is no objective reason why this should be so. Certainly the facts do not support Morrison’s contention that science degrees are more productive than arts degrees.

But the Albanese Government has done nothing to remedy this stupid inequity, even though it acknowledged some years ago that it should act.

Equally important, is the need to restore government funding of universities. Over the nine years of Coalition Governments under Abbott, Turnbull and Morrison, tertiary education funding hardly increased in real terms, which most likely means that universities went backwards, at least in terms of per capita student funding. Since then, under Labor total real funding for higher education has fallen even further.

In effect universities have been forced to balance their books by increasing the number and proportion of fee-paying foreign students. It is only because of a combination of these foreign students and increasing debt that universities have been able to survive financially.

But now the Government is capping the number of foreign students, and the universities cannot afford any more debt. Instead, around the country, universities are now signalling that they must lay off staff.

The Albanese Government, however, is doing nothing to help. It presumably rates reducing the debt of people, most of whom can afford to repay it under the generous terms available, as a higher priority.

Unfortunately, the one thing we can be sure of is that the future growth of productivity in Australia will depend on the quality of our universities and their graduates as they will determine the rate at of technological change and our capacity to benefit from new technologies.

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