We got two students to debate their opposing opinions on the possibility of the privitisation of HECS. Here’s what they have to say:
WORDS | David Varker
As Australia’s public finances rapidly deteriorate, the sustainable funding of university students may inevitably require the privatisation of HECS. Such a statement invariably leads to groans of ‘yuppie scum’ by the Socialist Alternative. However, this policy can preserve the current standards of funding while improving the government’s bottom line.
HECS debt stands at approximately $26.3 billion, with only 80 per cent having any hope of being collected. As a consequence, HECS results in an approximate $5.26 billion dollar burden to the government, a cost likely to increase in the future as more students enrol at university.
The question is: how does one claim that such a policy will not cost students, especially after claims of increased interest charges by fee-gouging banks?
In essence, investors are purchasing a right to receive HECS repayments from students on identical contractual terms, as negotiated between students and the government. The agreement confers no right for re-negotiating the rate of interest applied to the debt.
But why would anybody agree to this?
The proposal is that the rights will be sold at a discount to their true value, thereby giving investors their desired margin.
Architect of HECS, Professor Bruce Chapman, proposes an approximate figure of $15 billion as the likely proceeds from sale. What government subsequently decides to do with the proceeds of sale will ultimately ensure the transformation of HECS into a net gain for the budget. An option would be to invest the earnings into a wealth fund, the privatisation of Telstra establishing this precedent with the Future Fund.
By looking at the returns of the Future Fund (9.7 per cent over three years), a seed investment of $15 billion could lead to a fund worth $37.9 billion in 10 years. It is with this cash reserve that the government could then pursue the big-ticket policies, which the people of this nation deserve without debt.
WORDS | Rhys Zorro
The Privatisation of HECS is a sucker’s bet by ‘Treasury drop-outs’ still wallowing from their student union days. It is both economically and socially useless. Not long after entering government, the Coalition has adapted one of the more dumbfounded schemes of its cousin – David Cameron’s Conservative Government in the UK. This scheme has sparked student riots in London, and its economic ignorance has provided little-to-no returns for investors.
The Privatisation of HECS undermines the original aim of the scheme: to provide a smart, universal education system, aimed at opportunity, and underscored by economic pragmatism. Introduced by the Hawke-Keating Labor Government in 1989, HECS recognised the burden that universal free education was to the budget, and remastered it to be a literal investment in the further education of Australians. This was to be paid back once the dividends of higher education and skilled employment were realised, namely when a student’s income reached
$51, 309 a year.
The privatisation of HECS debt proposes to sell the ownership of this debt to a private firm; however, due to the nature of these investments, business will find little-to-no return. These debts have no defined interest rate (the CPI index) and no real timetable of payments. They are riddled with something the business sector hate most. Uncertainty! This is unappealing to firms who can already find safer investments with higher guaranteed returns in the marketplace. Socially, it risks higher repayments, and pushes students into a private debt they never signed. It corrodes the ideal of an inclusive education system, which supports all aspirations, and respects budgetary common-sense.
The true motives of this reform lie not in the aim or impact of the scheme, but in the sour vengeance of the former professional student politicians, Christopher Pyne and Tony Abbott. Their idealistic disposition to universal education motivates their relentless push against a Labor legacy, which harkens back to their years as student campaigners against Gough Whitlam’s free universal system. They will undermine this scheme, regardless of the evidence showing that a HECS policy makes us a richer, more prosperous country. Privatisation of HECS debt is economically baseless and disturbs a system that has enabled all of us to pursue a better life, and a more intellectual society.
MacroBusiness exclaims “F*cking Stupidity”.
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