1996 Cabinet papers: HECS ideas pursued and rejected

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This year’s National Archives Cabinet papers release includes material related to the 1996 Budget changes to HECS.

The most important of these were replacing flat HECS rates with ‘differential HECS’, so that rates were based on subject disciplines, and lowering the HECS repayment thresholds, so that debtors began repaying earlier and repaid more at each income level (historical thresholds are at page 47 of this document).

The main submission released today does not have these final decisions, but outlines different views within the government and bureaucracy about how to proceed.

In public statements, differential HECS was justified by reference to both course costs and the expected future income of graduates. Neither Treasury nor Finance were keen on using future income. Finance noted, as others have since, that it varies a lot between graduates. Treasury thought that it was unfair that students in some disciplines would end up paying a much larger share of costs than others.

The idea that students should pay a share of course costs has regularly resurfaced since, most notably in the 2011 base funding review. But in the Cabinet submission we see an early version of why this idea has been consistently rejected. In the draft differential HECS rates based on cost recovery, law ends up in the cheapest band 1 (of 5; there were 3 in the end), while nursing is priced in the middle. Nurses paying more than lawyers is not an easy political sell. In the final announced decision, law was in the highest-priced band and nursing in the lowest-priced band.

The Cabinet submission also has a pricing rationale of expected demand that was not, so far as I know, used in public statements.  If demand already greatly exceeds supply, prospective students are less likely to be price sensitive. But politically that raises the possibility that other students would be price sensitive, which the government wanted to downplay.

Capping access to subsidised higher education to one degree or to a time period was considered; the Fraser government had tried something similar. In the final policy this was sort-of implemented by concentrating funding cuts on postgraduate coursework places. A fuller version of the idea arrived with the 7-year learning entitlement under Brendan Nelson, which started in 2005.  It was later abolished by Labor.

While mainly about course charges, the submission also mentions means-testing access to income-contingent loans by linking it income support thresholds. That would have been the most radical conceptual departure from current policy in the submission if it had been approved. There is also the Department of Finance’s usual attempt to get real interest on student debt, which wins the prize for the most-suggested change to student loans that has never been legislated.

One omission is interesting in light of subsequent policy concerns. Although there is mention of the fact that (by design) not all HECS debt will be repaid, there are no estimates of how significant this is. Perhaps some numbers were in other submissions we have not seen yet, and could explain the big reduction in repayment thresholds.

In 1996 government accounting conventions struggled with income contingent loans, as they still do. The submission mentions which changes will and won’t count towards the politically-salient Budget deficit. Because expected losses from student doubtful debt are not counted in the deficit/fiscal balance, this biases policy towards cutting direct grants to universities, which do count.

Fortunately, however, accounting conventions did let 1996 policymakers see that selling the HECS debt was a bad deal for taxpayers. Another Cabinet submission makes this clear. This possibility was raised again in 2013, with the same eventual conclusion.

As these submissions show, many ideas around HECS/HELP recur repeatedly over time.

 

International students should be able to make political donations

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Late last year, the federal government introduced a bill to prohibit foreign political donors. It would have strangled charity and NGO political activity with red tape. After a strong backlash, earlier this month the government introduced a revised bill, with a substantially reduced, although still significant, level of donor-checking bureaucracy. Labor is backing the bill.

While the government’s amendments reduce the burdens on NGOs, they are more draconian for foreign donors. In the bill’s original version, all donations below $250 were deemed allowable. In the current version, foreign donors are completely banned from donating for Commonwealth electoral expenditure. This includes donations to political parties and to NGOs when their political advocacy might influence voting in a federal election.

While NGOs won’t need any anti-foreigner measures on donations below $100, a foreign donor could, in theory, be fined up $42,000 for making such a donation. NGOs would not be legally obliged to warn small donors of these potential consequences.Read More »

Universities might still be caught in the campaign finance net

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A Commonwealth campaign finance bill introduced late last year was strongly opposed by the university and broader NGO sectors. Most organisations commenting on a federal political issues were going to have to report on their donations and implement  highly bureaucratic systems to prevent ‘foreign’ donations to political causes. The bill would also have affected think-tanks such as the Grattan Institute, where I work.

The bill’s overly broad definition of political activity — public expression of views on an issue in an election by any means and/or public expression of views on a political party, MP or candidate by any means — was a longstanding problem in the law. I wrote a paper about it nearly a decade ago. Compared to the existing rules, the bill slightly improved on the status quo by creating some exceptions, including expressing views solely for genuine academic purposes. But in practice, the new campaign finance regulations were likely to lead to a much worse state of affairs than now.

Under the old regime, the AEC did not enforce the letter of the law.  Only organisations engaged in traditional campaign activities ever complied, and nobody was punished for not submitting the required reports on political expenditure and donations. During debate over the government’s bill it became clear that many NGOs in technical breach of the current law had no idea that it existed. But now they know, and MYEFO gave the AEC extra funds to implement the government’s ‘electoral integrity reforms’. That money could be used to increase compliance.

After near-unanimous opposition to its original bill, the government released a draft revision for comment. This seems to have satisfied Universities Australia, but I am not convinced that, despite its improvements, that universities should support the bill in its current form. Read More »

Ministers should not choose research projects

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Update 27/12/21: Acting education minister Stuart Robert vetoed six grants for 2022, saying that they do ‘not demonstrate value for taxpayers’ money nor contribute to the national interest’.

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Senator Kim Carr has been around forever, and knows what questions to ask in Senate Estimates. And yesterday he got the Australian Research Council to reveal that, last year, then education minister Simon Birmingham rejected 11 humanities grant recommendations. So far as we know, this hasn’t happened since Brendan Nelson was minister in the middle of the last decade (Gideon Haigh tells that story well).

As with the Nelson intervention, Birmingham’s decision has prompted outrage. The Australian Academy of the Humanities says that “this interference is entirely at odds with a nation that prides itself on free and open critical enquiry.”

Birmingham’s response is, in effect, that the rejected projects are not worth funding. On Twitter, he says “I‘m pretty sure most Australian taxpayers preferred their funding to be used for research other than spending $223,000 on projects like ‘Post orientalist arts of the Strait of Gibraltar.'”

He could have picked several other examples: “beauty and ugliness as persuasive tools in changing China’s gender norms”, “music, heritage and cultural justice in the post-industrial legacy city” or “Soviet cinema in Hollywood before the blacklist, 1917-1950”.

But that Australian taxpayers were probably not going to get value for money from these very niche projects is not the same as an argument for rejecting an ARC recommendation. Read More »

When can domestic undergraduates be charged full fees?

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Revised 2/1/2024, principally to remove reference to repealed laws denying funding to students who had not successfully completed a sufficient share of subjects taken. Further updated 22/7/2025 to include reference to FEE-FREE Uni Ready places.

‘Full fees’ is a term used in Australia as an implied contrast with students who pay a student contribution, a price-capped student charge. A student contribution is usually combined with a tuition subsidy called a ‘Commonwealth contribution’. The two contributions together are the overall funding rate for a ‘Commonwealth supported student’.

‘Full fee’ means that there is no government subsidy and the student pays all the provider charges. These fees are not price capped, although there is a price floor for international students. 

A ‘full fee’ should be distinguished from an upfront fee or student contribution, which is paid directly to a higher education provider. All international and some domestic students are ineligible for a HELP student loan and therefore pay upfront.

About 6 per cent of subjects taken by domestic undergraduates are full-fee paying. The simple explanation for this is that domestic undergraduate students in public universities pay student contributions rather than full fees, while undergraduates in private universities and non-university higher education providers pay full fees. However, there are exceptions in both cases, sometimes at the unit of study (subject) level rather than the course.

In what follows, all statutory references are to the Higher Education Support Act 2003.

Entitlement to Commonwealth support at a public university

Universities have significant discretion in advising domestic students that they are Commonwealth supported: section 36-5. 

A domestic student is an Australian citizen, a New Zealand citizen, or a permanent visa holder: section 36-10(2).

Generally, domestic undergraduates enrolled in a Table A university (commonly known as public universities, although including the two Catholic universities, ACU and Notre Dame) must be enrolled as a Commonwealth supported student: section 36-30(1). Exceptions to this are discussed below. 

Once a student is a Commonwealth supported student, he or she can be charged a student contribution but cannot be charged another tuition fee: section 169-15(1).

If a student is not Commonwealth supported they must pay the tuition fee set by the provider: section 169-15(2). 

Becoming a Commonwealth supported student creates an on-going entitlement for that course, unless one of the exceptions below becomes relevant: section 36-25(1).

Read More »

Many graduates will repay less per year, and maybe less in total, under the new HELP thresholds

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The Government had a rare higher education Senate victory this week, passing various amendments to the HELP loan scheme.

These include a series of changes to HELP repayment thresholds. Most of the political attention went to the initial repayment threshold, below which no repayment is required. It will drop from the current $52,000 to just under $46,000 in 2019-20. At that point, debtors will have to repay 1 per cent of their entire income.

In principle, I support this step in the direction of better aligning HELP with other government income support thresholds. This 2016 Grattan report supported a lower initial threshold.

Unfortunately, another key recommendation of that report, of consistent percentage increases between each threshold at which the repayment rate increases, was not strictly followed.

For most of the higher thresholds, each is 6 per cent higher than the one before it. But there is a 15 per cent gap between the first and second thresholds.

Combined with starting the repayment percentage at just 1 per cent,  this radically changes the nature of the threshold reform. It is not now something that we can assume will significantly alter HELP doubtful debt.

One intention of the original Grattan proposal was to move debtors more quickly through the repayment rates.  This was partly to recover more HELP debt before female full-time labour force participation drops from their late 20s, as shown in chart 1 below.

Chart 1: Female bachelor degree graduate labour force status, 2016

female labour

Read More »

Should international students lose political rights?

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One of the biggest changes to Australia migration this century, and through it to Australian society, has been the rise of long-term residents without the rights created by permanent residence or citizenship.

International students make up a large proportion of these restricted-rights residents, with more than half a million in Australia this year. While most international students go home after finishing their studies or convert to permanent residence, some stay on successive temporary visas for ten or more years. Other large categories of restricted-rights residents include New Zealanders and people on temporary work visas.

The total number of residents with limited rights varies depending on which visa categories are counted, but more than 1.8 million people are in this category.

As well as having no or limited access to social security benefits, often insecure tenure in Australia, and no right to vote in elections, restricted-rights residents are caught up in recent moves against ‘foreign’ political donors.

In Victoria, the current campaign finance bill links the right to make a political donation to eligibility under Commonwealth social security legislation, adding to the disadvantages that legislation already creates. (There is a loophole, as entities with an ABN can donate, and you don’t need to be a permanent resident or citizen to get an ABN. So ‘foreigners’ can donate via their business interests but not otherwise.)

With a very low donations caps in the Victoria bill – only $4000 over the four year electoral cycle to a political party – nobody could have much influence via donations.  Even if ‘foreigners’ are a bad influence the problem would be already solved another way.

The Victorian legislation’s one redeeming feature is that it only applies in a limited context.  It covers donations for political expenditure with the dominant purpose of attempting to influence votes in Victorian elections. So other donations to political parties, and donations to third parties campaigning on issues rather than directly advocating a vote, would not be covered.

In practical terms, that means that international students could donate to campaigns on state issues that are important to them, such as crime and public transport concessions.

By contrast, the federal bill that would ban ‘foreign’ donations of $250 or more covers a very wide range of political activity. It covers any public expression of views on a political party or candidate, and any public expression of views on an issue that is, or could be, an election issue. As it is hard to know what could be an election issue, a cautious approach would read this as covering any potential political issue.Read More »

Is government spending on tertiary education getting more progressive?

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One long-made argument against tertiary education subsidies is that they are regressive. University students tend to come from more privileged backgrounds, and therefore high-income households receive a disproportionate share of government spending on higher education.

Based on gross household income, ABS data on the distribution of government benefits released today confirms that this is still true, as the chart below shows, although the ratio between the highest and lowest income quintiles is lower now than in the past.

Slide2

On an equivalised income basis, which takes into account household size, the distribution of spending is more even. This reflects the fact that although students tend to come from relatively affluent households, these also tend to be relatively large households containing a couple and their children. Making it disposable income makes it more even still, given progressive taxation. Read More »

Does ATAR measure more than SES?

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One reason ATAR is criticised is that it tends to reproduce socioeconomic status.

One of ATAR’s critics complains that it is

“…more likely to measure the relative wealth of schools, more than a student’s abilities. In fact, using a students’ postcode might work just as well.”

Similarly, another critic says that “ATAR scores align more closely to postcode than they do to human potential…”.

While ATAR is not this deterministic – there are a range of abilities in every part of the SES spectrum – it’s true that ATAR correlates with family background, student home location and school attended (the scale of school effects after controlling for SES  is contested).

But that the ATAR achieved is influenced by a student’s social background does not mean it isn’t measuring something real about likely academic performance.

As the chart below shows, fail rates increase as ATARs go down across the socioeconomic spectrum. For a given ATAR, there is very little difference by SES.Grattan ATAR_chartdeck

Similarly, attrition after first year is more closely associated with ATAR than SES, as seen in the chart below. attrit_atar_ses

Although differing slightly in some of the detail, this is consistent with my posts earlier this year arguing that SES has most of its effects prior to post-school education, with  university access, performance and outcomes being similar for low SES students as other students: the same results, or small positive or negatives. It is also consistent with our recent Grattan report on dropping out, which found more narrowly, but also with more statistical rigour, that low SES in itself only had a small negative effect on the completion rate.

Is ATAR still widely used?

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The recent Mitchell Institute report on ATAR created an impression that ATAR is no longer widely used as a basis of admission to university. Based on figure 3 in their report, it said that only a quarter of students are admitted to undergraduate courses based on their ATAR.

That figure is correct in itself, but easily misinterpreted.The standard university practice is to admit students based on their most recent relevant academic results. For many applicants, their most recent relevant academic result is not Year 12, but previous university studies or vocational education. These applicants have been trending up as a share of all newly admitted students.

For school leavers, their Year 12 results are generally still their most recent relevant academic results. For them, ATAR is used not in one-quarter of cases, but three-quarters, as the chart below shows.

For other commencing students using previous higher education as their basis of admission, their ATAR is no longer their most recent relevant academic result. But often it was used to admit them to the university in the first place.

The chart below shows that when we take 2016 commencing students back to their original admission to university, 46 per cent were first enrolled based on school education with a recorded ATAR. For the under-25 year olds, 56 per cent were admitted based on their school education with an ATAR.

So while it is true, and increasingly true, that low-ATAR students can find other routes into university, ATAR is still the major selection tool for young people.

admitted_atar

Source: Department of Education and Training, Higher education data collection