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Tuesday, 2 September 2014
Page: 9372


Mr PORTER (Pearce) (13:05): There are several reasons to progress these reforms that have been proposed by the government. I think there is one reason for caution; however, the minister and the government have exercised caution and have considered that reason, which is what I would like to focus on in my contribution to the second reading debate of the Higher Education and Research Reform Amendment Bill 2014. There is one issue that Labor and a number of students are correct to raise and it is worthy of consideration and analysis. It looms as a potential but not an actual reason as to why you might not proceed or proceed very cautiously. The reason for caution and the issue that is legitimately raised is whether an even modest potential fee increase and/or a slight increase in the share of total costs that a student is required to contribute could lower the overall number of lower-SES students or the percentage of SES students of the total. That is the single hurdle that you must consider before engaging reforms of this type.

There are a number of clear benefits to these reforms but you need to consider that hurdle. That is a question that warrants analysis. In some respects, Labor's position is to answer that question in the resounding affirmative and then move seamlessly from the proposition that lower numbers or a lower percentage of low-SES students will be involved in education to a conclusion that the sector should be somehow quarantined from reform of the type being suggested.

The problem with Labor's analysis is this: in all of this debate—so far the contributions by the member for Kingston and the Leader of the Opposition—and in every single utterance that has been made publicly there has not been one single, credible piece of evidence to show that these reforms, based on any historical or empirical analysis, will decrease the number of lower-SES students or their percentage of the total involved in tertiary education. If there were genuine, correct and authoritative research to that effect, that would be a reason for concern, but there simply is not.

In focusing on this one issue I want to just have a look at the only two pieces of evidence that I have seen raised regularly by Labor or, indeed, by student protesters in recent times. The first is a report by Deloitte Access Economics—and I must say, that is an authoritative and well-researched piece of work. It is worth considering, but ultimately it answers the wrong question. In fact, I think it was the member for Kingston herself who raised that particular piece of research.

The second piece of 'research'—and I am being generous to it—was work that was quoted very recently in an article in The Guardian that relays work by:

… a group of mathematicians from the ANU’s Mathematical Sciences Institute …

who 'built a model' to help understand the effect of the reforms. I want to deal with that second piece of work reported in The Guardian first, because when the member for Kingston talks about 'authoritative, independent and empirical analysis', this is the sort of stuff that is being thrown up in debate.

The article is written by a member of the ALP, but there is no harm in that. Everyone is entitled to their view. This is Mr Mansillo. The article relays that a group of mathematicians examined the education minister's completion of a law degree. Their analysis was this: they looked at the present education minister, they assessed that he did a law degree some time ago, they estimated an annual fee for law degrees after the reforms that we are proposing, they assumed a starting salary, they applied and interest rate to repayments and then calculated how long it might take to pay off that law degree.

I just have some observations about this independent piece of analysis. The first is: seriously? This is a calculation you could do in three minutes, probably without a calculator. Possibly you might need one of those big solar powered calculators you buy from Kmart—the ones with the big buttons that my grandma used to use. I mean, a group of mathematicians at ANU? That is absolutely absurd! Modelling? Come on! This is something a year 9 student could do using long division. It is just fundamentally wrong. How many mathematicians at ANU does it take to change a light bulb? A group, apparently! Someone has to hold the light bulb and the others have to do the long division over the course of several hours, it appears. How utterly ridiculous!

And the research is based on this absurd assumption about how much a fee charged by universities for a law degree would be. In fact, at ANU the estimate that this research has given is twice what the ANU's Professor Ian Young suggested would probably be the kinds of fees that university would charge—double! It then has an interest rate which is far higher than the 10-year bond rate is currently. It has an assumption about the starting salary that is absolutely ridiculous and which is plucked from thin air. In that case it assumes that the starting salary for a lawyer would be $42,000. Public sector lawyers earn far more than that—considerably more than that—in their first year of service as a lawyer. Indeed, commercial lawyers who graduate from universities earn up to double that amount, well in excess of that starting point.

I note that the present minister did spend some considerable amount of time on the backbench, and perhaps his earlier career arc was not exactly what he wished it would be, but the reality is that, like most lawyers, there is a tendency to go on and earn large yearly incomes, with much larger yearly increments in income. This article went on with another absurd assumption, which was to assume a five per cent salary increase for lawyers. This is the point; this is precisely the point: like it or not, men and women who graduate with law degrees go on to earn on average much larger incomes at much larger yearly increments than those people who do not graduate with law degrees, or who do not graduate from university. We have heard the figures that the average university student earns a million dollars more in their lifetime income stream than the average person who has not graduated from a university.

So with this type of research being relied upon, the argument in opposing these reforms is precisely this: that the tradespeople of Australia—the middle-income earners contributing to the tax base—should pay more rather than less for the education of people who graduate with law degrees and other tertiary education students who graduate and who go on to earn considerably more than the average contributor in the tax base. That is a silly proposition. At the moment it is the case that the tradespeople are part of those six out of 10 Australians who have not gone, or who are unlikely to go to university, and yet they presently foot the bill for 60 per cent of the cost of a bachelor degree student. Tax is supporting only the other 40 per cent of the cost of that degree. It is eminently reasonable to ask any tertiary education student to cover half of the costs by a low-income-deferred loan for their degree when we consider that they go on to earn considerably more—a million dollars more on average—in their income stream than a non-tertiary educated person.

The difficulty with this debate and following it as it has been run and contributed to by the opposition is that it is solely run on emotion. There are words like 'abolishing equality'—this sort of utter nonsense which fails to get to the heart of the matter and which fails to deliver anything resembling empirical evidence of what is a proposition that deserves analysis, which is to say: will lower-SES students be somehow disadvantaged by these reforms? There has been an absolute absence of that evidence. As I said, I have heard two things raised: the first was that article that I have just spoken about and the second was a report by Deloitte Access Economics.

What the overwhelming preponderance of research—peer reviewed academic research; qualitative research in this area—shows and states is that there is a very high, if not an immense, inelasticity of demand to fees when you have a deferred HECS-style system. In an article, 'Australian higher education financing: issues for reform', Bruce Chapman from the Centre for Economic Policy Research says—and he is talking about the Whitlam era:

The abolition of university fees at this time had no discernible effects on the socioeconomic composition of higher education students, …

Of course, that does not fit neatly into the methodology that we have all been given and the emotion put in this place, but that is independent, qualitative, peer reviewed research. The reason is twofold, as the article further says:

First, only a small proportion of students (20-25 per cent) paid fees, since the great majority had either Teacher's College or Commonwealth Scholarships.

So we know that scholarships are very important in driving equity into the system. Further:

Second, because secondary schooling retention rates … were very low at the time—

much lower than they are now. So those Whitlam changes did not, as a matter of empirical fact, do what is repeatedly suggested by members opposite that they did.

Then the next series of evidence occurs during the 1990s—the period whereby there were great changes with respect to fees under the HECS system. We went from a system of part-deferred user pays from the Whitlam-free system, with many scholarships before that. The National report on higher education in Australia 2001 released by the Department of Education, Science and Training, the DEST report, found that HECS repayments by students during the relevant period of the report over the 1990s increased nearly eightfold to $900 million and during that same time higher education enrolments in Australia grew by 30 per cent from 400,000 to 525,000. The empirical evidence, the actual math of this situation, shows us that where we have asked students to make a greater contribution through a deferred loans system that has had the effect of growing the overall number of people involved in tertiary education.

That then leads us to the third phase of analysis. Inside that growing number, which is high-, middle- and low-SES income students, has the proportion of lower-SES students decreased? Has the increased payments that we have experienced consistently post Whitlam decreased the percentage of lower-SES students? The answer is no. Fascinatingly, the number of low-SES students has remained unbelievably constant during all the increases in fees at around 14½ per cent. Many people have researched this and almost all wished that there was a different answer, that the HECS system had destroyed SES lower-income participation—but it simply has not.

The article 'Social justice in Australia higher education policy: an historical and conceptual account of student participation' by Gale and Tranter, concludes:

Figure 1 illustrates that the proportion of students from the lowest quartile of SES has remained remarkably stable over the last two decades at around 14.5 % (compared to a population reference value of 25%) …

So in the general population, low-SES people of that age would be about 25 per cent; in the university population, notwithstanding very considerable increases in fees, some instigated by the members opposite during the 1990s post Whitlam, the percentage has remained incredibly steady. There is no empirical evidence to the opposite. If you have some evidence raise it, but I know as a matter of diligent research that it does not exist. If you had it, you would have raised it by now. The cards would be on the table.

There are many reasons why this is a good reform, but there are a few in particular that I want to focus on here. Firstly, the reforms will for the first time ever see the Commonwealth provide direct financial support for all students studying for higher education diplomas, advanced diplomas and associate degrees. And what type of income quintile students do we think they might be? Lower SES-students will share a greater proportion of that diploma, advanced diploma and subdegree market than any other income quintile of student. Secondly, financial support will also be extended to all Australian higher education students in registered nonuniversity higher education institutions studying bachelor degree courses. Again, this will expand the opportunities for more Australian students every year to receive tertiary education, building to support over 80,000 new students a year by 2018. There is no guarantee necessarily that that 14.5 per cent participation figure for lower SES students will increase, but history suggests that it will not decrease. And by growing the pool of students involved in the system, the sheer number of lower-SES students will benefit.

The third reason that this is going to be a positive thing for lower-income-SES students is that the package compels universities to invest 20 per cent of additional revenue into scholarships for disadvantaged students. The history of tertiary education in Australia has been that over the last two decades costs and fees have risen and that has been because of an agreement on both sides of politics that it is and was inequitable to have tradies paying for 60 per cent of the education of tertiary educated people, who go on to earn much more than them over a lifetime income stream.