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Thursday, 11 September 2003
Page: 19844


Mr ANTHONY (Minister for Children and Youth Affairs) (11:17 AM) —I rise to speak on the Family and Community Services (Closure of Student Financial Supplement Scheme) Bill 2003 in this cognate debate. Firstly, I would like to acknowledge all those who have participated in this debate, and I would certainly like to address some of the comments made by the member for Cunningham in his analysis of the SFS Scheme. Before I do that, I will address some of the comments made by previous speakers, notably from the Labor Party. Today's debate has highlighted that the ALP have a complete lack of understanding of the Student Financial Supplement Scheme. Labor say that they oppose the closure of the scheme because it will prevent students from accessing university studies. But the truth is that the scheme is structurally flawed and it is a debt trap. Even the National Union of Students acknowledged that it is a debt trap. It said:

The NUS opposes the student financial supplementary scheme because it places students in a debt trap.

It also said:

Students from disadvantaged backgrounds were even worse off when they finally graduated. It was a complete failure.

This is coming from the trade union movement—the NUS. Students who participate in this loan scheme can effectively pay interest rates of up to 16 per cent. Is that fair? This might have been okay back in the halcyon days when Labor were in government and interest rates were around 20 per cent—and I see the member for Cunningham nodding—but it is not okay in an environment where interest rates are substantially lower. An interest rate of 16 per cent is outrageous when this government's good economic management has meant interest rates are at record low levels. The point is that the National Union of Students has called for the scheme's closure because it is bad for students.

Labor are saying that they want students to be burdened by debt. The loan scheme is attached to the income support payment system and it falls, of course, into the Family and Community Services portfolio. What is interesting is that the shadow minister for education seems to have carriage of this bill. Worse still, it is clear that the shadow minister does not even understand the scheme. Today she has been talking about the government's higher education package. This is about income support, not a higher education package. This bill is about income support for students. The truth, unfortunately, is that I think the ALP have not even bothered to do their homework on this particular scheme. They have backed themselves into a corner, because their higher education reforms are partly funded by retaining this scheme—that is the bottom line. They neglected even today to recognise that the short-term savings are far outweighed by the long-term costs of this scheme. Short-term savings may be $159 million because students will not be trading in their income support payments to take their loan, but the long-term costs are potentially billions of dollars because more than 50 per cent of students do not repay their loans.

I would like to take up some of the points made by the previous speaker, the member for Cunningham. Looking at the repayment rates, I will just clarify the figures. There is a 56 per cent default rate by those on Youth Allowance, Austudy or perhaps DSP and a 84 per cent default rate by those on Abstudy. So this scheme is structurally flawed, and it is putting more and more students into poverty because they can never get out of that debt trap.

The Labor Party are not opposing the closure of the scheme because they say they care for students; they are opposing the closure of the scheme because they are desperate to fund their higher education package. This is the worst case of short-sighted, uninformed policy making that I think we have seen in this parliament for a very long time. When you look at the scheme, you can see it is fundamentally flawed and yet they are using these short-term savings to fund their higher education package. Is it any wonder that the member for Lilley is letting the shadow minister for education take the running on this piece of legislation, when he should be doing it? He knows bad policy when he sees it. He hears the band playing while the ship is going down or it could be that he knows the train is about to crash. He does not want anything to do with it because he knows this is bad policy. He does not want a bar of this billion dollar mistake, because that is what is happening: billions of dollars are being further accrued into a potential liability, not just for the Commonwealth but, more importantly, for those students who are desperate to improve their lot through higher education.

The one thing that Australia can be sure of, though, is that if the member for Jagajaga ever gets a grip on the Commonwealth budget strings—if she is ever on this side of the House—then this particular scheme, if it is still in place, will continue to impoverish those students and lead to real poverty traps for these individuals. Today she has outlined amendments to the legislation that will cost the government more than $80 million over four years. But the question that needs to be asked is: how will this be funded? The member for Jagajaga has partly funded her higher education policy on the assumption that the loans scheme continues. As I have said, I genuinely believe that Labor have backed themselves into a corner on bad policy—`bad policy' even coming from the NUS. The short-term savings might be $159 million, but they are far outweighed by the long-term costs, which are potentially billions of dollars because more than 50 per cent—54 per cent or 84 per cent depending on which category you are in—will not repay their loans, even though they had to trade in half their youth allowance to do that.

I must say that the member for Lilley's contribution to this debate was quite extraordinary. It was really a diatribe of abuse on the Minister for Family and Community Services, and maybe he did that because he did not actually want to speak on the content of this bill. He talked about everything else but that, including family tax benefits, which he tagged onto this bill. But the reality is that he knows that he was rolled—I suspect in his own caucus—on supporting the government on `a bad piece of legislation' even where the NUS opposed the maintenance of this scheme.


Ms Macklin —He's making it up!


Mr ANTHONY —I am so glad the member for Jagajaga has turned up because she might be able to explain the illogical step about using the retention of this to somehow fund their higher education package.


Mr Hardgrave —She now knows what Swan's done to her!


Mr ANTHONY —Absolutely! I can only assume that the member for Lilley is trying to run away from this train wreck that is appearing, particularly in the area of the Student Financial Supplement Scheme.

Honourable members interjecting


The DEPUTY SPEAKER (Hon. D.G.H. Adams)—Order!


Mr ANTHONY —Now that everyone is so enthusiastic and I have regained their attention on this bill, I would like to get into some of the substance about why we believe it is necessary for this scheme to be closed. The government announced in April our intention to end the loans scheme because it is not delivering good outcomes for students or for the Australian taxpayer. I do appreciate that the member for Cunningham is showing respect and listening to the debate. The structure of the scheme is fundamentally flawed. In order to receive a loan, students have to trade in a component of their income support payments. This means they can have effective interest rates, as I mentioned before, of up to 16 per cent. The loans scheme is creating high levels of student debt, with some students—and it is a fact—having to pay debts as high as $28,000—or even up to $60,000—because they continue to take out those loans with no capacity to repay them.

As I mentioned before, the Australian actuary has estimated that 56 per cent of those on youth allowance will never repay these loans—worse still, for Abstudy it is 84 per cent—with more than $2 billion of debt outstanding since the scheme started in 1993. You can understand why the scheme was put in place in 1993: it was impossible for students in that period to gain access to short-term loans because interest rates were so high—because of the government of the day having a very poor fiscal and monetary policy—and, likewise, the youth allowance did not exist, so there were not other forms of income support as generous as they are today to help students back in the early nineties. So when we talk about more than $2 billion of debt being outstanding since the scheme began, that means around $1.2 billion of taxpayers' money will never be repaid. For many students clearly the scheme works more like a gift than a loan. However, this is a gift that Australian taxpayers cannot afford. While closing the scheme appears to cost money, the reality is that neither the government nor the Australian taxpayer can afford to keep a scheme that has delivered a billion dollars in debt since 1993. This debt will continue to increase every year that the loans scheme continues to operate.

The Student Financial Supplementary Scheme is also a bad deal for students. Let us go through that. The design of the scheme requires students to trade in or give up $1 of their student assistance scheme entitlement for $2 of loan payment. But both the dollar traded and the extra dollar provided by the loan have to be repaid. How can that be a good deal? How can it be a good deal to trade in half of your youth allowance to take out a loan when you still have to repay it? Of course, many cannot do that. The government, in closing the loans scheme, is saying to students, `We want you to keep your student assistance entitlements, not accrue them as a debt to hang around your head for years before you have to repay them to the government.' Around 8,000 students—this is interesting—have accumulated over $20,000 of debt under this scheme and yet the proposal by the ALP is to maintain this scheme, which will further impoverish students who have no capacity to repay. I reiterate that the National Union of Students, who you think would be supporting the political wing of their party, is against it. It is a rubbish scheme. It is structurally flawed, and yet Labor still blindly endorse it because it is really a de facto way—and the member for Jagajaga knows this—of funding their flawed higher education policy.

Someone with a debt of $28,000 who earns $35,000 a year is going to have that debt for 40 years before it is fully repaid. So a graduate who finishes their studies at, say, 25 years of age, with a supplementary loan debt of this size, could be in debt to the government until they qualify for an age pension. Is that a good deal for students? I think not. By and large, students are recognising for themselves just how bad a deal the supplementary loan is. The take-up rate of the loan has fallen by more than 35 per cent since it was introduced in 1993. So, to answer one of the member for Jagajaga's previous questions, the number of students taking it out has been diminishing quite dramatically because they know it is a bad deal for them and many of them will never have the capacity to repay it.

In a media release on 24 April 2003, in response to the government's announcement of its intention to close the scheme, the Australian Vice-Chancellor's Committee Chief Executive Officer acknowledged that the SFSS may have outlived its effectiveness in assisting students. That came from the Vice-Chancellors Committee. In a media release of 24 April 2003, the National Union of Students said that it opposed the Student Financial Supplement Scheme because it placed students in a debt trap. The NUS also said that this was a great victory for students and for the student union. The NUS opposed this loans scheme when it was introduced in 1993. It opposed it back then and it opposes it now because it is bad policy.

The government already provides—and this is important—adequate assistance to students. More young people than ever before are receiving assistance through youth allowance. I acknowledge that there is always a need for students to have as much assistance as possible to help them get through their studies. The final report, though, of the youth allowance evaluation highlighted the broad community support that exists for that program. The reality is that more students today who are funded through youth allowance go on to higher education. Over 380,000 young people receive youth allowance. They may not all be in university—I acknowledge that—but there are more students in higher education today because of the changes that were made to youth allowance. Rent assistance was attached to it, which they never received before, and that is very important for students who have to move geographically to seek higher education, and there are other benefits attached to it as well.

The interesting thing is that there have been substantial changes to try and improve the financial viability of students who are undertaking higher education. The other point is that, with access to higher fortnightly income-free areas and the student income bank, students are able to contribute to their own support and stay connected to the work force while they study. We acknowledge that for many—


Ms Macklin —They are certainly doing that now or they would starve.


Mr ANTHONY —We acknowledge that many students have to have part-time jobs and that is exactly why the income bank is at $6,000, which is substantially higher than any other form, to provide that incentive. Youth allowance is more flexible, with income support that removes the financial disincentives to study. We are unashamed about that. When we introduced youth allowance, under the old Austudy system it was easier to get the dole than it was to go on to higher education. Youth allowance was specifically put in place with extra financial assistance to encourage young Australians to go on to further education. It was to make it easier than the system under the previous ALP policy, where it was easier to get unemployment benefits—


Mr Hardgrave —Or get big debts.


Mr ANTHONY —or get big debts, as I am reminded, than it was to go on to further education. Youth allowance, as I said, is encouraging more young people and, indeed, more young people from disadvantaged backgrounds. Of course, it is a constant struggle for all governments to ensure that more people have access to further education. And that is the case whether or not they come from my electorate which, as the member for Jagajaga mentioned before, is not a prosperous seat, but even in that area we have a university campus, which we never had before in my local community, and more young people are going on to higher education and are staying in the local area.

Students receiving youth allowance—Austudy and Abstudy—are entitled to concessions that are not available for other income support recipients: there is a more generous income-free area of $236 per fortnight, as I mentioned; the $6,000 student income bank; and advance loans of up to $500 each year to assist them with the cost of enrolment or extra books et cetera. Students on youth allowance and Abstudy may—depending on their qualifications, the means test and where they live—have access to rent assistance of up to $93.20 per fortnight. When the Student Financial Supplement Scheme was introduced in 1993, that never existed. These things are in place now as a recognition that the marketplace has changed—in particular for young people—and other forms of assistance are required.

The fundamental problem with the Student Financial Supplement Scheme is that it encourages people to get further into debt, which can only disadvantage them as they try to put themselves through university to obviously better themselves and their career. They are left with the albatross of continuing debt because they physically have to trade in half their youth allowance. That is not fair. Legislation to close the Student Financial Supplement Scheme is about sound economic management. It is a better deal, no doubt, for Australian taxpayers, but, more importantly, it is a much better and realistic deal, particularly for students, and that is why the number of students taking it out has been falling consistently. When they analyse it they know that it is going to mean potentially further debt, as I have demonstrated—up to 54 per cent, if not more—and, with interest rates effectively at 16 per cent, they are better off getting a personal loan, even at nine per cent or 10 per cent.

The reality is, though, that Labor have backed themselves into a corner over this because they are using this smoke and mirror trick as a way to finance their higher education reforms. As far as higher education reforms go, the government does have a very good alternative—which is being spearheaded by the minister for education—and that is about providing more opportunities and more places for Australian students. But what we want to ensure, though, is that—


Ms Macklin —That's a lie!


The DEPUTY SPEAKER (Mr Lindsay)—Order! The member Jagajaga will withdraw that last comment.


Ms Macklin —I withdraw the comment.


Mr ANTHONY —I was reminded by the Minister for Citizenship and Multicultural Affairs that the Labor Party love debt. They cannot have enough of it. They left the Commonwealth debt—the black hole—for us, which we inherited. That is fine. We have done the right thing by the Australian taxpayer: we have repaid the debt through good economic management and yet the Labor Party want to continue to impoverish the next generation of Australian students by maintaining this scheme when even their own union, the National Union of Students, is opposed to it.

Here is an extraordinary situation, where the industrial arm of the Labor Party—their benefactors—are saying: `Come on, guys. Don't support this. Member for Jagajaga, don't perpetuate this scheme to fund your policies for higher education. Get rid of it. We agree with the minister; we agree with the government. Other areas, like youth allowance, have been far more successful.' The proof is in the pudding. Of the students who take out these loans, with effective interest rates of 16 per cent and default rates of 54 per cent or higher, the vast majority will never repay them. (Time expired)

Question put:

That the words proposed to be omitted (Ms Macklin's amendment) stand part of the question.