Zoe Daniel (Goldstein, Independent) Share this | Hansard source

The final report of the taskforce charged with coming up with the Universities Accord put it bluntly:

Australia must significantly increase participation in tertiary education. This is a matter of urgency. Australia is not meeting its current skills needs and will not meet them in the future unless we produce more higher education and VET graduates.

Failure to increase student numbers to meet these needs will do lasting damage to Australia's prospects of national economic success. It will also do lasting damage to social cohesion by preventing generations of Australians from enjoying the career opportunities and higher incomes that tertiary education makes possible.

This is not a surprise. Businesses and economists were warning about skills shortages years ago. COVID exacerbated the problem, and now we find ourselves without the skilled workers we need, whether it be workers to supercharge the transition to clean, green and cheaper energy or the skilled workforce to build and service the AUKUS submarines, should they ever see the light of day.

To make up for lost time, the report listed four ambitious targets: lifting the tertiary attainment rate, university as well as vocational education and training, from 60 per cent currently to at least 80 per cent by 2050; increasing the proportion of university educated Australians aged 25 to 34 from 45 per cent currently to 55 per cent by 2050, requiring a doubling of the number of Commonwealth supported students in universities from 860,000 currently to 1.8 million by 2050; planning for 40 per cent of 25- to 34-year-olds to have a tertiary-level vocational or technical qualification in 2050; and providing opportunities for lifelong learning for all Australians to reskill and upskill. None of these targets is out of the question, but they are quite a challenge.

When HECS was introduced in 1989, less than eight per cent of the population had a degree. By 2023, it had risen to 21 per cent. That is quite a climb, but it is also a reminder of the task ahead of us if we are to get to 80 per cent by mid-century, especially when young people are under pressure in ways that most of us were not at their age. Forty-five per cent of Goldstein residents have a degree, which is close to double the national average. Nearly 20 per cent are currently studying at university, which is nearly five per cent more than elsewhere. But these students are living with greater instability, insecurity and uncertainty than earlier generations. Employment is much less secure than it was in the past and there is no certainty anymore that a university degree will reward a graduate with higher income than someone without tertiary qualifications. On top of all that, they are living amid a once-in-a-generation cost-of-living crisis. Rents have reached a record high, with the median weekly rent in Australia now at $659 a week—9.4 per cent higher than a year ago. The days when it was relatively easy to find an affordable share house are over, as are the days when students could be sure their pay in part-time jobs would keep pace with inflation.

Many young students in my electorate are still living at home with their parents because they simply can't afford to move out. That because, in real terms, although recently wages have finally grown slightly, the average wage is the same now in real terms as it was in 2011. Meanwhile, the escalation in tuition fees means that graduates have much higher HECS debts in real terms than even a decade ago, and much more than when the system was introduced. When HECS came into being, the idea was that all university degrees would cost the same amount—$1800 a year, the equivalent of around $4,700 today. Significant, but not insurmountable. It's not the same story now. Tax office data compiled by the Australia Institute shows that Australians in their 20s with a HECS-HELP debt in 2005-06 had an average debt of $12,557. From then until June 2023, inflation increased by 57 per cent. Had the average size of debt increased in line with inflation, the average 2022-23 HECS-HELP debt held by people in their 20s should have been $19,546. Instead, according to the Australia Institute, the average debt had risen by 145 per cent, and was $30,763. That doesn't even consider the previous government's ineffective and punitive Jobs Ready Program, which saw the cost of a communications degree, for example, rise from around $20,400 to $43,500.

It was early in 2023, before that year's federal budget, that it became clear to me that the high rate of inflation was creating hardship for some HECS-HELP debtors, whose debts were increasing faster than repayments. At the same time, real wages had been falling, creating a perverse outcome—as the Universities Accord report noted—where HELP debts were growing just as relative ability to service debts was declining. I spoke to the education minister about recognising the difficulties that high inflation was creating for students and recent graduates by reforming the indexation formula for HECS-HELP debts. I suggested that the formula should be determined based on whatever was lower—the consumer price index or the wage price index—as happens in some places overseas. Although it took a year, to his credit, the minister added this to the work program for the Universities Accord review, which accepted and recommended the change in this year's budget, helped along by a massive petition launched by the member for Kooyong. The result is this legislation, which, by backdating the change to last year, when HECS indexation was pegged to an inflation figure of 7.1 per cent, is wiping out around $3 billion in student debt for more than three million Australian. Those with an average debt will see their liability cut by $1,200.

I truly appreciate the efforts of the minister and his staff, and that he has listened to the crossbench on this matter, but the job in relation to HECS-HELP is only partly done. The government has yet to give effect to two other elements of its recommendation for HECS-HELP reform. They are: to reduce repayment times by changing the timing of indexation for HELP loans so that amounts withheld for compulsory repayments can be accounted for before indexation is applied; and reviewing bank lending practices to ensure that banks recognise that HELP loans are not like other types of loans and are not treated in a way that unduly limits people's borrowing capacity for home loans.

In the 1980s, when HECS came in, the average house cost about 3½ times the average salary, according to esteemed finance journalist and my former ABC colleague Alan Kohler. Today it's more than doubled to 7½ times the average income, and that means that every single dollar that can be scraped together for a deposit matters deeply to a first home buyer. Unfortunately, for new graduates who have started a family, their HECS-HELP debt definitely does not help, because banks penalise people for the amount of HECS owing, adding it to what's owed in genuine debt on a car loan or credit card, for instance.

The minister promised to talk to the banks about this inequity and told reporters, as he announced the HECS indexation change:

… the Assistant Treasurer has written to the banks. He's written to the ABA seeking more information on the way in which banks treat HECS debt.

We have yet to hear about any outcome from the Assistant Treasurer's inquiries. I'm sure that the House would appreciate knowing the result of any discussions and whether lending institutions are prepared to regard HECS debt differently from other debt.

Students and other stakeholders also approached me about another inequity in the system, one relating to the timing of when the annual rate of indexation would be imposed. As the accord review notes:

Though this timing (which is late in the financial year) assists with the administration of the HELP system, amounts withheld during the year are not applied to reduce HELP debts until the following June. In some circumstances, HELP debts may have been 'acquitted' if not for the application of indexation prior to repayments being recognised.

This means that the way that compulsory repayments and indexation are set up means that the extra tax withheld for HECS-HELP repayments on individuals' salaries does not actually apply until they submit their tax return after indexation has been applied. In just one example, modelled by the Parliamentary Library and based on a graduate who completed their studies in 2010 with a debt of $15,292—the cost then of an average degree—the difference is small but significant. The final payment, if indexed first, would be $679, but it would be just $298 if repayments were made ahead of indexation—a saving of $381 to the graduate. Obviously, the bigger the debt, the bigger the saving. The accord review recommends:

… the timing of HELP debt indexation be changed to allow the Australian Taxation Office (ATO) to ensure that amounts withheld from debtors' income during the financial year can be applied as a compulsory repayment before indexation occurs …

This change must be made, and I urge the minister to finish the job and get it done.

In the context of the most severe inflation crisis the Australian economy has faced this century, our laws guiding accessibility to tertiary education must serve our students, not saddle them with more and more debt. We know, and so does the government, that the calculation of a student's HELP loan prior to the processing of their end of financial year tax return amounts to a double-dipping of debt repayments. This results in many Australian students often paying more than they otherwise would have, more than their fair share, if calculation occurred later in the year. We also know—and the government does too—that HELP debt is often yet another barrier for graduates and young Australian families seeking a loan or mortgage. Banks and financial institutions consider existing HELP debt as they assess an individual's eligibility. This practice must end.

For these two reasons and to alleviate the financial burden on Australian students who choose to pursue tertiary education, I move the second reading amendment as circulated in my name:

That all words after "House" be omitted with a view to substituting the following words:

"(1) notes that:

(a) many degrees have increased in cost well above CPI resulting in punitive HELP debts placing additional financial burden on Australians in the midst of a cost-of-living crisis;

(b) in 2023, soaring inflation resulted in a HELP indexation rate of 7.1 per cent;

(c) the indexation of HELP debt prior to repayment each financial year unnecessarily increases the cost of debt repayments for graduates and young Australians; and

(d) HELP debt is considered by banks in assessing eligibility for mortgages and loans, creating additional barriers for graduates and young families as they try to buy a home; and

(2) calls on the Government to calculate HELP debt indexation after the due date for individual tax returns each year".

I will be supporting this legislation as a step in the right direction, but there is much more to do.

See this speech in context