Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Hansard source

Doesn't the Abbott government love debt! Here we have another case of it: providing access to debt to young people. We have seen it for university students—raising fees massively and then increasing interest rates, creating debt as far as the eye can see for people graduating from university—and now we see it with these training loans of up to $20,000 for people as young as 16 who are still at high school.

A country's resilience depends on the household balance sheets as much as it depends on the government's, and we see here a government that is prepared to see our young people start their lives with rising debt levels. It is an extraordinary contribution to the future of this nation by a government that claims that debt is bad, but not if they can give it to someone else. It is also worth commenting on the decision by this government to go down this path. The excuse they used in raising fees for universities and introducing these $20,000 loans for trade apprentices is that they need to address the country's deficit. Yet, if you compare the budget outlook through the forward estimates to PEFO—the Pre-Election Economic and Fiscal Outlook—that is prepared under the Charter of Budget Honesty which Peter Costello introduced, you can see that they have not managed to reduce the debt at all. In fact, the deficit is slightly larger, and we come back to surplus, on their projections, some two years later. So on the one hand they have actually increased the debt relative to the pre-election fiscal outlook, and on the other hand they are also raising debt levels for young people who are starting out in their first years as adults.

One has to wonder how much consulting they did on this to come to the conclusion that providing a $20,000 loan rather than an upfront payment to provide tools would increase the completion rates. We hear from members opposite that one of the problems is that one in two apprentices are not finishing their apprenticeship, and this providing of a loan rather than the Tools For Your Trade Payment will somehow increase that completion rate. I wonder, though, how it would have any impact at all if an apprentice is actually put off by their employer—if the employer stands them down and they are no longer in their apprenticeship. How does having a loan help that apprentice complete their apprenticeship?

They say that one of the reasons they are doing this is that apprentices have been out buying mag wheels and going on holidays with their Tools For Your Trade Payment. Where is the evidence that providing a loan will not have that result? Assuming that young apprentices do actually buy mag wheels—and I know many who do not do that—how does providing a loan change the behaviour at all? I would love to see the research for that. If, even in the first few months, an apprentice decides that the apprenticeship is simply not for them—if maybe they cannot physically do it, or they thought it was one thing and it is not—how will providing loans keep that person in the apprenticeship? And should it keep that person in the apprenticeship?

I always love this government's maths, and their maths tends to bring them down every time. One of the claims that they make on the government's side is that, by providing a 20 per cent discount on that $20,000 loan at the end of the apprenticeship, apprentices will be incentivised to complete the apprenticeship. But, again, if you look at the figures—and I doubt that the government actually has—43.9 per cent of apprentices in the trade area actually drop out in the first two years, and another five per cent drop out in the third year. In the fourth year, the percentage is very small. But 43.9 per cent drop out in the first and second years, and, by my very quick calculations, if you are taking out the loan at the rate that you are allowed—which is $8,000 in the first year and $6,000 in the second year—it is actually cheaper to drop out at the end of your second year than it is to complete the apprenticeship and get your 20 per cent discount. So if you decide that the apprenticeship is not for you, not only would you need to waste another two years to get your 20 per cent discount, but also your loan would be bigger at the end of that time, not smaller. The financially sensible thing to do under this arrangement is to drop out in those first two years if that is what you choose to do. It simply does not make sense.

In the construction sector, the figures are even more stark. Forty-eight per cent of apprentices drop out by the end of the second year and 51.8 per cent drop out at the end of the third year, and that is pretty much where it sits by the end of the fourth year. So, again, for that 48 per cent of people who drop out by the end of the second year, their cheapest option is to do exactly what they are doing. If they finish their apprenticeship and stay there for another two or 2½ years, their debt will be bigger even with the 20 per cent discount than it would be if they drop out. On the figures alone, this is not a rational decision and certainly will not achieve what the government expects it to achieve. What it will do is leave a large number of young people who decide that the apprenticeship is not for them, who lose their apprenticeship because the employer puts them off or who find that physically they just cannot do it with debt which will hinder their ability to start their lives on a firm financial basis.

One of the other issues that we raise a lot on this side of the House is the misinformation that the now government gave out when in opposition. Prior to the 2013 election Tony Abbott announced the trade support loans but did not announce that they were going to scrap Labor's $1 billion Tools for Your Trade apprentice program, which gave $5½ thousand per apprentice to help with buying tools. This now means that, as of 1 July, apprentices who enter their apprenticeship on one basis, who were planning on using a payment later on this year to pay for tools and who may already have entered into a payment plan to do that, will suddenly find that payment not forthcoming. It is usual when governments make changes like this to recognise that people have quite often made decisions based on one policy and to ease the change so that those rational decisions that people made can be followed through to their logical conclusion. But again, before the election, Tony Abbott did not tell apprentices that as of 1 July they would lose up to $3,700 for a first-year apprentice, and first-year apprentices are expecting that payment very shortly. Being young people, they may already be depending on that.

The new program—the trade support loans—are not lump sum payments. They are not payments that are designed to help young apprentices with those lumpy payments they have to make when they buy their tools. They are not designed for an apprentice who, for example, may need to buy a second-hand ute to get to a site. They are not the lumpy payments that an apprentice chef would have to make when they buy their knives. Those knives, by the way, if you have never bought a chef's knife, are incredibly expensive. They are in the hundreds of dollars per knife—incredibly expensive gear. You will find the same for carpenters if they are buying good tools. You will find the same for many apprentices. There can be very expensive, lumpy payments that come along in the early years of an apprenticeship because they have to buy tools.

These payments are actually designed as if they are income support payments: paid monthly in arrears. Again we hear members of the opposition saying that young people can save up those payments to buy their tools, but again we are talking about very young people here—people as young as 16, still in school, 18-year-olds and 19-year-olds—with not a lot of life experience or experience in managing income. In fact, this might be their first income, and they are being asked to manage saving up payments in order to buy quite expensive tools. It is really quite challenging for many young people who may be entering the workforce for the first time and receiving the first payments and who will find themselves in quite severe financial difficulties because of the low payments, particularly in the first and second year. These are young people whose wages will be very low in the first and second years—particularly the first year—because their skills are not of great use to the business employing them, and so their wages are very low in the first year. Asking a young person to manage saving up these monthly payments when they are in really quite serious financial difficulty in order to buy tools is a very big ask. It is difficult to see how this system of monthly payments will stop apprentices from spending their money on things other than tools. It may not make it easier for the odd apprentice who, as the opposition keeps saying, wants to go off and buy mag wheels, but we will probably see apprentices spending it on rent, food and all the other things they need and still not being able to buy their tools at the end of the day.

We on this side of the House will not oppose the bill. An optional loan is the government's policy and was the policy before the election—one of the few policies that they are actually following through on—but we do not believe it should be at the expense of the Tools for Your Trade scheme. We also believe that, if a loans scheme is in place, there should be appropriate advice requirements in place to ensure informed and voluntary decisions by apprentices, some of whom, as I have said, are school based apprentices as young as 16 years of age. One could come to the conclusion, for example, that a 16-year-old perhaps should have their parents' permission before entering into a loan of $8,000 in the first year. A 16-year-old is very young to be making that decision.

The bill has been referred to the Senate Economics Committee to examine the payment mechanisms, the payment of monthly instalments of the loan amount and the loan terms and conditions into the future and to consider what protection young people, particularly those under the age of 18, should have in terms of general loan advice and parental approval. These are incredibly important aspects that should really have been considered prior to this policy announcement. The level of consultation on this has been quite poor, and it shows in the poor design of the program.

Another issue of real concern to this side of the House is the government's confirmation that they are looking to outsource debt management for trade support loans. Again, placing young people who have entered into debt of up to $20,000 at a time in their lives when they are not high income earners and may not be for quite some time in the hands of private debt collectors is a worry. We do not think it is a good idea at all, but we are waiting to see what the conditions of such a thing would be. We are waiting to see how a government would regulate to ensure protection of 16-year-olds from private debt collectors.

Again, these are not people who have experience in earning a living, they are not people who have experience in handling their own money—they are learning their way through that. By the time they graduate as an apprentice they would have been through four years at least on very, very low wages. They will have, on this program, at least $20,000 in debt and they will then be, of course, going through the process of trying to find the best place to work in a sector that is increasingly contracted out and really quite volatile. We all know that construction, for example, is one of the first areas in the economy that starts to slow down. If things get bad we will probably find apprentices with their $20,000 of loan who have managed to pass the income threshold and are beginning to pay off those debts who find themselves in and out of the workforce quite frequently in their early lives and eventually have to work as contractors in order to make a living. Again, with volatile incomes which make it even harder to manage regular loan payments and potentially with private debt managers on their backs.

There are a lot of aspects of this bill that are very worrying. I go back to the initial point: this is a government that claims that debt is bad but is very, very happy to saddle very young people with debt at this level at the very early stages of their adult life. I would ask government members to seriously consult on this and see if they can find ways around some of the issues that I have raised.

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