Andrew Leigh

3 September 2014

The government's Higher Education and Research Reform Amendment Bill 2014 was debated in the Parliament this week. I spoke about Labor's record investment in universities and how the proposed reforms are regressive, will harm our tertiary education sector and ultimately the productive capacity of Australia.

I rise to speak on the Higher Education and Research Reform Amendment Bill 2014 on the back of 16 years in universities—six years at the University of Sydney, four years at Harvard and six years teaching at the great Australian National University. It is with deep concern that I rise to speak on this bill, put forward by a political party with a very poor track record in education.

When the Howard government first came to office its immediate decision on higher education was to cut the higher education budget by five per cent. None of that was announced before the election—something of a pattern for the coalition—but the result was that direct public payments to tertiary institutions showed no real growth from 1995 to 2005. Per capita funding for universities fell by nine per cent. The Howard government brought in voluntary student unionism, reliving their student politics days, and they stripped the funding from campus services. That was the situation in which Labor found the university sector when we came to office in 2007.

From 2007 to 2013 Labor invested in Australia's universities. We commissioned the Bradley review, which looked at the situation of universities, and noted that we did have high-performing universities. For example, if we compare the Australian corporate sector with the Australian university sector, we have got just nine Australian companies in the Fortune Global 500, but we have 19 universities in the world's top 500 universities. I would always argue for us to aspire to do better, but we should also be proud of what Australian universities have achieved.

As a result of the Bradley review, Labor increased funding to Australian universities. One in four students at Australian universities is there today thanks to Labor. Between 2007 and 2013 we put 190,000 more students on campus; we boosted Indigenous student numbers by 26 per cent and regional student numbers by 30 per cent; and we increased the number of students from low-income families by 36,000. Labor in office increased per-student contributions by 10 per cent. That is an extra $1,700 per student. We changed the funding model. We committed to proper indexation of university funding, making universities better off to the tune of $3 billion compared to the situation if we had kept the funding model introduced by the Howard government. Real indexation was vital because university costs were rising significantly faster than CPI. If you increase university funding by the rise in prices then it is quickly outstripped by the cost of salaries and high-quality equipment, which we know that our universities need. Labor in office reformed Youth Allowance, offered the new Student Start-up Scholarship, and launched the MyUniversity website in 2012.

It is no surprise then, that when the coalition were discussing their education policies before the 2013 election, they did not reveal any of the plans that they had for universities. Why would they? They were looking at a government which had increased the per-student funding by 10 per cent, and which could claim credit for one-quarter of the students at university. In the 'Real Solutions' Liberal Party policy document—you don't see so much of 'Real Solutions' around these days, Deputy Speaker; it seems to have gone into witness protection!—on pages 40 to 41, it says: 'We will ensure the continuation of the current arrangements of university funding.' Tony Abbott said on Insiders on 1 September 2013: 'I want to give people this absolute assurance, no cuts to education'. Christopher Pyne on Sky News on 17 November 2013 said: 'We want university students to make their contribution, but we are not going to raise fees.' Pressed on Sky News—'Why not raise fees?'—the now minister responded, 'because we promised we wouldn't before the election.' In a media release on 26 August 2012, Christopher Pyne said, 'While we welcome debate over the quality and standards in our universities, we have no plans to increase fees or cap places.' All of this has been betrayed with some of the most radical plans for higher education that Australians have seen. Those opposite have described these as big changes: well, they are right—in the way that a stopped clock is right twice a day. But they are wrong if they think these are good changes for the Australian university sector.

As Bruce Chapman, architect of HECS and my former ANU colleague, has noted, these are changes which could well hurt the propensity of low-income students to attend university. And Bruce Chapman does not say that lightly: he has done research showing that the 1989 introduction of HECS did not deter low-income students from attending university. He has done research with Chris Ryan showing that the 1998 changes to the HECS bands did not deter low-income students from attending university. But this change, and in particular the introduction of a government bond rate on debts, is of great concern to Bruce Chapman. He has said in an interview with The Australian on 4 June 2014: 'Interest has been subsidised for a very good reason: to not disadvantage the people who do not do well out of the system.' He said, 'It is an ethical issue.' And he has warned that these reforms could 'lead to a situation where students are potentially charged more than the cost of the service; more than the cost of the teaching".

Indeed, modelling put together by Timothy Higgins and Bruce Chapman has concluded that poor graduates could pay 30 per cent more for a degree than their high-income counterparts. The reason for that is that, given the same starting debt, low-income graduates are hit harder by compounding interest on their debts because they spend more time out of the workforce and have lower salaries. The researchers conclude:

Using the long-term bond rate will be regressive and it is very hard to argue this is fair. HECS was designed to protect people who go to university but, because of bad luck or bad circumstances, don't get to enjoy the benefits. HECS should act as an insurance mechanism and that aspect of the scheme is being undermined.

When we talk about this as being regressive, it is a regressive reform like so much else this government is doing. This is a government which is raising superannuation taxes on those earning any less than $37,000 a year, but cutting superannuation taxes on those with more than $2 million in their accounts. This is a government that is changing Australia's fair parental leave scheme to an unfair parental leave scheme; benefiting those at the very top of the distribution, while at the very same time it is cutting away supports for low-income families—taking one tenth of their income out of the pockets of the poorest sole parents in Australia.

These changes will not only be regressive; they will disproportionately hurt women. We know that one of the great benefits of HECS—with debts indexed to inflation—is that if someone takes time out of the labour market to raise a child, then by the time they come back into the labour market, wages have grown faster than prices, and their debt, relative to wages, has become a smidgen smaller. But this government has taken a feature of HECS and turned it into a bug. The existing HECS system has debts growing at two per cent while wages grow at four per cent—so a time out of the labour market sees your debt grow more slowly than your wages. But under these proposed reforms—if we imagine prices growing at two per cent, wages at four per cent, and the government bond rate at six per cent—if someone takes time out of the labour market, their debts will grow faster than wages. Their debts will grow at six per cent—considerably faster than the four per cent that we might expect for wage growth.

It was my pleasure today, along with the member for Kingston, Senator Carr, and the Leader of the Opposition, to visit the University of Canberra. While we were there, we met researchers in the area of applied ecology who are engaged in looking at the genetics of reptiles—research which will help us better understand the world around us, and better understand human health. This research is absolutely vital research for the future of Australia. And yet the University of Canberra is vulnerable to cuts in its research budget. And we have a higher education minister who is threatening research grants—that is, threatening applied ecology; threatening medical research—if he does not get his own way. This is student politics on a national stage. We have the minister's petulance being taken out on the researchers of the future. Not only does this government not have a science minister, not only is it slashing 1,000 jobs in the CSIRO, but now they want to take out some of the best researchers from Australian universities. Those jobs at CSIRO going already. I have talked to CSIRO researchers who are losing their jobs who are specialists in eucalypt ecology. Where else in the world will we get good research on eucalypt ecology, or research on better understanding forestry management?

On top of that, as well as cutting those CSIRO jobs, as well as not having a science minister, this government is cutting into basic research. They have never met an expert they do not want to fire. When Joseph Stiglitz, a Nobel Prize winner in economics, visited Australia recently he urged the government not to go down this path. The government appears to be ignoring this advice and to be ignoring what is going on in the United States. The parallel is with climate change. In the area of climate change, under this government Australia is running backwards from the science and economics as fast as it can while Barack Obama's first priority was to put a price on carbon pollution.

In the area of higher education, this government is trying to trash Australia's great income-contingent loans system while in the United States the government is looking at how to improve that country's student loan system—how to get that country's student loan system into a place where students are not priced out of doing jobs in the community sector. An income-contingent loans system created in Australia in the late 1980s, thanks to people like Bruce Chapman and Bob Gregory and inspired indeed by work Milton Friedman did in the late 1960s, is now being taken up in countries as diverse as Britain, Germany, Israel, Thailand and Chile. But the income-contingent loans system works when debts are indexed to prices and not to the government bond rate. Not only is the government indexing debts to the government bond rate for those entering university; it is doing so for those already in university and for those who have graduated from university. One graduate who contacted Labor said:

I have been totally deceived by this and punished for helping some of the most disadvantaged kids in the state.

I have a partner, mortgage, 3 primary school kids and believe I had already been unfairly targeted in the budget. This Liberal Party (which I have never voted for) is really messing up people's lives.

How can an Australian Government allow people to make life defining decisions and then renege on an agreement? Without warning, my family has just been hit with a $14,000 debt, which will also be charged interest (but that's another story) and for reasons that are simply baseless.

As the Leader of the Opposition pointed out at this very dispatch box yesterday, putting a real interest rate onto the debts of people who have graduated from university does smack of regressivity. Those opposite are outraged whenever there is a measure before the House that looks like it might potentially be regressive, but where are they when this government is putting a real interest rate on the debts of people who have already graduated from university? Missing in action—that is where they are.

These changes are ultimately going to hurt the productive capacity of Australia. Education is not just the best economic policy we have devised—it is the best social policy we have devised. We know that if you want to close the Indigenous/non-Indigenous gaps, one of the best ways of doing that is to get more Indigenous students to university and encourage them to stay there. Just as women will be disadvantaged by these moves, so too students from low-income backgrounds and Indigenous backgrounds will be disproportionately affected. This government cannot cut its way to closing the gaps, and if these reckless changes go ahead they will, I fear, reduce the number of students who are the first in their family to attend university. I urge the government to rethink these changes and take them back to the drawing board.