Nothing to Fear From Reform

This figure is particularly significant as relatively few students are likely to incur costs much more than the current top HECS rate. We know this, because there is already a completely deregulated undergraduate market for overseas students, and the prices they pay indicate that on average the cost to an Australian undergraduate would increase by $1,000 a year after deregulation. This would still put most undergraduates below the $5,682 annual top HECS charge, after the Government subsidy is taken into account.

The sensible response to what debt aversion problems do exist is not to cut off a source of funding essential to quality university education, but to persuade those who are debt averse that education is a good investment. Little has been done to show potential students how much their lifetime income could increase if they go on to further study. Once this research is done and widely publicised I expect it will reduce debt aversion, as well as providing others with useful information to help them decide on courses and institutions.

Moodie’s argument that reform is bad economics rests on the fact that Budget outlays would be less certain, as everyone admitted to a university would be entitled to a subsidy. He thinks the central economic departments would object.

This is at most a minor problem. The central economic departments manage numerous areas of expenditure that are not predetermined. We do not, for example, fix the number of old age pensions at a certain number and let the balance of elderly people go without. We don’t set a maximum national annual number of visits to the doctor and just leave anyone who gets sick after the number is reached to suffer on their own. Closer to the topic under discussion, we don’t have set numbers of school students.

While tertiary education is perhaps not yet as essential as any of these services, there is a strong case for at least offering everyone going to a quality-assessed higher education institution a loan, if not a subsidy. The central economic departments will learn to make reasonable estimates, as they do for many other economic variables.

Reform is not bad for education, social policy or the economy, but is it bad politics? Moodie claims that the proposals would encourage institutions with sectional and local interests to lobby government for private advantage.

This is the wrong way around. Sectional and local interest lobbying is what we have now, because there are no other ways of getting public subsidy. If the system were actually based on clear principles, such as subsidies and / or loans for everyone attending an accredited institution, there would be no need for such lobbying. Provided you achieved some objective standards you would get the subsidy or loan.

Moodie’s article is in the tradition of scare-mongering to stop change. On a fair assessment of the evidence, his fears are baseless.