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Education and Employment Legislation Committee
25/02/2015
Estimates
EDUCATION AND TRAINING PORTFOLIO
Department of Education

Department of Education

CHAIR: We are at outcome 3.

Senator Birmingham: Chair, just before we commence—

CHAIR: Yes.

Senator Birmingham: If it is the expectation that outcome 3 is going to take a long a time, I seek some clarity on the record from the committee so that officers who will not be required for rest of the night might be able to go and get some sleep.

CHAIR: The committee has had some deliberations, and outcome 1 and outcome 2 will now be part of a spillover day to take place on Friday afternoon. So outcome 1 and outcome 2 officers can go home. Outcome 3 officers, please stay. We are sure we have enough questions to keep you going until 11 pm. We will reconvene for an inquiry on higher education.

Senator Birmingham: Is that all areas of outcome 3?

Senator RHIANNON: So you are saying outcome 1 and outcome 2 are now on Friday, not on Thursday?

CHAIR: My understanding is they are on Thursday, but the secretariat—

Senator KIM CARR: Is there a spillover day on Friday?

CHAIR: No, Thursday of the sitting week was my understanding.

Senator RHIANNON: Yes, that is what I understood.

CHAIR: Yes. Anyway, they are not required tonight, and we will make sure that everyone is well aware—

Senator Birmingham: So it is next Thursday afternoon?

CHAIR: After 4.

Senator Birmingham: After 4 pm on Thursday of next week.

CHAIR: Yes.

Senator Birmingham: Okay.

Ms Paul : Thank you for the clarification.

CHAIR: That is bearing in mind that ministers had to be available on appropriate days too. Alright, so Thursday after 4 pm. We will let you know the exact time, Ms Paul, and they will be required for up to three hours.

Ms Paul : I am sorry?

CHAIR: Officers will be required for up to three hours, after 4 on Thursday next week.

Senator WRIGHT: I understand that Senator Carr is going to indulge me with five minutes just so that I can knock out some rather odd questions that I thought would be in environment but are in the research aspect of outcome 3.

CHAIR: You are so indulged.

Senator WRIGHT: These are questions about the 'integrated marine observing system'.

Ms Paul : I am sorry?

Senator WRIGHT: These are questions about the Integrated Marine Observing System.

Ms Paul : Yes, that is indeed in the National Collaborative Research Infrastructure Strategy.

Senator WRIGHT: Yes, thank you. I will quickly get these out of the way.

Senator Birmingham: This was a wonderful discovery for both of us the other day, Senator Wright.

Senator WRIGHT: It was, indeed. IMOS—it is my understanding that one of the Integrated Marine Observing System underwater acoustic observatories is currently deployed off Kangaroo Island in South Australia. Am I right in thinking that is the case?

Mr Griew : That is the case.

Senator WRIGHT: I also understand that the data from this acoustic observatory is, or will be, publically available. Is that right too?

Mr Griew : Let me just find the brief, unless Ms Hart can add.

Ms Hart : We will probably have to take that on notice.

Mr Griew : I am just finding the brief that I have. Sorry, we have been slightly taken by surprise—

Senator WRIGHT: I am sure you have; I am sorry.

Mr Griew : because we were not expecting outcome 3 at this moment in the evening.

Senator WRIGHT: No, and you were at the very last part of it.

Mr Griew : Officers with all the expertise are on their way here now; one of them is just arriving.

Senator WRIGHT: Okay, thank you for that.

Mr Griew : Sorry, what was your question?

Senator WRIGHT: My question was: I understand the data from this acoustic observatory off Kangaroo Island should be publically available, is that right?

Mr Griew : That is not specifically covered in the brief I have here, so we might have to take that on notice. When you say publically available—

Senator WRIGHT: The data will be available to the public.

Mr Griew : It is certainly available to all the collaborators in the capability.

Senator KIM CARR: This is IMOS, is it?

Senator WRIGHT: Yes.

Mr English : Yes, data from the facilities is generally made publically available, although for particular collection points and particular results we would have to check to get a bit more precise advice for you. But, generally, the principle around the National Collaborative Research Infrastructure Scheme is that the results of their work would be publically available, and, generally, that would include data. But, for a site within a network that spans the coast of the country, I would have to check; I am sorry.

Senator WRIGHT: Do you mean you would have to check for a particular site?

Mr English : Yes, that is right.

Senator WRIGHT: Thank you for that—

Mr English : For the facts of Kangaroo Island, I would have to check.

Senator WRIGHT: because that was my question: when will it become available? I am asking because the data collected will likely contain whale calls, which will help determine whale presence in that particular area off Kangaroo Island. It is information which is of critical importance because of the amount of oil and gas exploration that has been planned in the Great Australian Bite in coming months and years by a number of operators, including Bite Petroleum, Schlumberger, Ion, Chevron and BP. How long does it usually take between collecting the data and it becoming publically available, in the general scope of things?

Mr English : I would take that on notice, Senator, if I could, because that will require me to get very particular advice from that organisation about their practices with respect to the management of the data from collection to publication.

Senator WRIGHT: There is a significant amount of interest in the data amongst scientists and researchers. They are keen to get a sense of how they can get the data and how that data can be made available to them. What is the best way for them to keep abreast of where the data is up to?

Mr English : Certainly I would encourage most researchers to contact the project managers directly. The IMOS is a well-managed project. They will have well-established protocols for the sharing of data, and that is part of the arrangement for having them in the NCRIS system. The researchers would go to those projects directly.

Mr Griew : The South Australian node of IMOS is operated by the South Australian Research and Development Institute, in collaboration with Flinders University. That would be the place. You are aware, of course, Senator, that this is not a government instrumentality? This is a research—

Senator WRIGHT: Collaborative, yes.

Mr Griew : collaboration of a number of independent organisations.

Senator WRIGHT: Yes.

Mr Griew : But it sounds like the South Australian Research and Development Institute would be a good place to start.

Senator WRIGHT: To start, yes.

Mr Griew : Or the University of Tasmania—that is the lead agent in the IMOS collaboration.

Senator WRIGHT: All right.

Senator Birmingham: Senator Wright, as officials have taken some of that on notice, obviously, we will try to get some response about whether that data subset of the bigger project is made public.

Senator WRIGHT: Yes.

Senator Birmingham: Obviously, as has been made clear, the findings of the project are made public but there is some uncertainty about to what extent—

Senator WRIGHT: Specific data.

Senator Birmingham: individual data subsets are made public. So we will try to get some clarity on that. But in the meantime SARDI is a good place for you to go and talk to, and I am sure you have contacts there.

Senator KIM CARR: Madam Secretary, I have noticed that page 42 of the portfolio additional estimates statements details a number of key performance indicators. It strikes me that there have been significant revisions in the number of domestic undergraduate low-SES students—a reduction of 2,600 in the number of domestic undergraduates from lower SES. There is some change there. That is not a reduction, but how do you account for that? Statistical area level 1 measurement, what is the difference for the variation there?

Ms Paul : I might get our measurement experts up. People are still driving in, I think, so we will see if we have the right people.

Senator KIM CARR: Ah, well I will come back to that.

Ms Paul : No, it is okay, we are almost there.

Senator Birmingham: You will just have to forgive us if you can, Senator Carr. Obviously, we started to assume that outcome 3 was either going to get on very late tonight or not at all.

Senator KIM CARR: Did you?

Senator Birmingham: And we were unaware that the committee was rescheduling.

Ms Paul : I think we are there though, we are just looking through the thing.

Dr Taylor : Which estimate was it again, sorry, Senator?

Senator KIM CARR: On the second line in the table on page 42: the difference between domestic undergraduate low-SES students has fallen by 2.6 on your revised estimates by 2,600 and:

Statistical Area Level 1 (SA1) measure of the number of domestic undergraduates in low SES—

is plus 5,700. How do you account for the difference?

Dr Taylor : They are measured slightly differently, I am just checking that we are looking at the same one. The statistical area 1, the one that lists 119,700—is that the one?

Ms Paul : Yes, that is the one. Senator Carr, you are looking at two things: are you looking at the line that has 119,700 in the last column, and the line above it?

Senator KIM CARR: Yes.

Ms Paul : Yes.

Dr Taylor : Both these estimates are revised based on the latest actual data, and they are both using slightly different measures. The number of domestic undergraduate low-SES enrolments is based using the postcode measure, which was the measure for the baseline for the 20 per cent target, whereas the statistical area 1 is a slightly different measure. It is still an area based measure, but that is used largely for HEP funding. So they do give you slightly different results. The SA1 is not attached to the 20 per cent target, whereas with the number of domestic undergraduate places we use the 20 per cent target as the end point and work backwards. They are done in slightly different methodologies, and in this case they have given us a slightly awkward result in that they have gone in different ways.

Senator KIM CARR: I will come to a number of these. Can you provide me with the number of Commonwealth supported domestic undergraduate places over the forward estimates, given this revision.

Mr Griew : Projected to be occupied by low-SES students, or in total?

Senator KIM CARR: No, the total domestic undergraduate. That was just a statistic that jumped out at me. There is considerable variation, and I know how fond you are of consistency, Mr Taylor. Can you tell me what the number of Commonwealth supported domestic undergraduate places now is, given the revisions, over the forward estimates.

Mr Taylor : Before my colleagues get to that, these projections use places to help project it forward, but they are mainly based on what happened in the immediate year and the statistical area. If it does not match up with projected growth, it may be because the methodology used to get these estimates does not rely on that growth.

Senator KIM CARR: What does it rely on?

Mr Taylor : It goes by past pattern. The difference here is that the statistical area 1 just goes by past pattern, and we assume that trend continues; whereas the undergraduate low-SES enrolment is tracked forward to the 20 per cent target and then works back. They use different methodologies that, in this case, have given us a bit of a different result.

Senator KIM CARR: Let's go to page 40—the budget estimate was $725,000 and now the revised budget estimate is $721,000. How do you account for that?

Mr Taylor : That one was derived by extrapolating the university estimates. University estimates had levelled off, so we levelled off the projection.

Senator KIM CARR: Are you now able to give me a revised estimate across the forward estimates based on these figures? I am looking particularly for the number of Commonwealth supported domestic undergraduate places. You clearly have one for this year.

Mr Taylor : My colleagues may have that figure. We certainly produced these for the budget documents.

Mr Griew : I think we should take that on notice. Because this is an estimates document, it is in financial years, so there is an added complexity, because the universities estimate to us in calendar years. Could I suggest we take on notice for you our current projections based on university advice of the years that they have given us those projections for?

Senator KIM CARR: I am looking for—given you are going to answer the same question and give me the same answer, I am sure—the number of Commonwealth supported domestic undergraduate places; the number of Commonwealth supported domestic postgraduate places; the number of domestic enrolments full-time equivalent; the number of domestic postgraduate enrolments full-time equivalent; the number of undergraduate completions; the number of postgraduate coursework completions; the number of higher education graduates in full-time employment within four months of the completion of a degree as a proportion of those available for work; the graduate starting salaries as a proportion of male average weekly earning; the number of domestic undergraduate low-SES enrolments; the statistical area 1 measure of the number of domestic undergraduate students in low-SES across the forwards; and the proportion of higher education undergraduate students from low-SES background. Can you provide that?

Ms Paul : If we can and, of course, Dr Taylor said it relies on university estimates. But you want that over the forwards—

Senator KIM CARR: That is right—based on these new estimates.

Ms Paul : Yes, that is fine.

Senator KIM CARR: There is a significant change here.

Senator Birmingham: There is, Senator Carr, but I note that they are all still going up—

Senator KIM CARR: No, that is not right.

Senator Birmingham: compared with 2013-14.

Senator KIM CARR: How is that? Look at the number of domestic enrolments, full-time equivalent: 725 down to 721.

Senator Birmingham: Well, 693,310 up to 721,200, going year on year.

Senator KIM CARR: Yes, but I am interested—

Senator Birmingham: So there is still a significant increase. It is a slightly smaller increase than the original budget had—

Senator KIM CARR: No, it isn't—

Senator Birmingham: and hopefully we will be able to give you some more information as to why that estimate has varied. But I would not want you to suggest that there was a decrease happening. It is still a significant increase in the number of domestic enrolments, full-time equivalent.

Mr Griew : The same—

Senator KIM CARR: Ten months ago you gave this parliament some statistics—well, not you, but the department provided this parliament with statistics—and you are revising them.

Senator Birmingham: I suspect that the other factor—and I will be corrected by officials if need be—is that 10 months ago we would not have had an actual for 2013-14 because, of course, 2013-14 had not completed at that time. So, given that these projections are based on projections of the previous year's actuals, it would not be unusual for there to be an adjustment that occurs to projections once the previous year's actuals are finalised. That is what would happen in pretty much any budget circumstance.

Mr Griew : And, in fact, that number came down.

Ms Paul : Yes. If you are doing apples with apples, you either go budget to budget, which of course is actually not as useful, or actuals to actuals. As the minister just said, that would be comparing 2013-14 with 2014-15—693,310 with 721,200. Because we rely on university estimates, I imagine it is not too surprising that it looks like that over time. It is also the case that in 2013-14 whatever they had advised turned out to be slightly less—only slightly—3,000 and, as it was, 4,000 in 2014-15.

Mr Griew : Can I just come back to your question, Senator? Some of those items that you asked for we would have on the basis of projections from universities. Some of them we would not. We would not have projections of employment rates for undergraduates. That is a factor of the macroeconomy as much as anything we get estimates from universities on. We will do what we can.

Senator KIM CARR: Obviously, whatever you have. You provide a set of statistical series on selected higher education that is often a little late. But now that you have provided this revised budget number, you must have some additional calculations about what the level of demand in the system will be?

Ms Paul : We would have what the universities have supplied to us. Whatever allows for projections we will give you against what you have asked for. If we cannot, we will say why.

Senator KIM CARR: Okay. When I look at the RIS that was published last year for the higher education bill, on page 111, under '7.2 no change option', the department has estimated that:

… the uncapping of student places in 2009 and subsequent enrolment growth are estimated to cost an additional $7.6 billion in CGS outlays by government over five years from 2013-14.

Mr Griew : That remains our estimate. I do not have the RIS with me but that figure—

Senator KIM CARR: You are familiar with that estimate?

Mr Griew : I am familiar with that estimate, yes.

Senator KIM CARR: And you are saying that that remains your view?

Mr Griew : I will take on notice whether there is any refinement to that, because, as you have just noted in the previous exchange, we have twice-yearly updates from the universities on their projections of likely enrolments, but that figure is familiar to me as the figure that we have previously used.

Senator KIM CARR: It has been used several times, I know. Are you able to provide me with a funding profile of that estimate? How do you reach that conclusion year by year?

Mr Griew : Certainly not this minute, but I can take that on notice.

Senator KIM CARR: No, no. Obviously it is not something you carry in your head but—

Mr Griew : There are some people here who might, actually!

Senator Birmingham: There is the odd walking abacus amongst them!

Senator KIM CARR: Would you take that on notice, please. In terms of the department's estimate, what now is the growth rate in the system? What do you anticipate the growth rate to be?

Mr Griew : Between '14 and '15?

Senator KIM CARR: Over the forward estimates, year by year, what do you think it will be?

Mr Griew : We will have to take that on notice as well.

Senator KIM CARR: I will have to go to specifics then.

Mr Griew : The general trend is clear.

Senator KIM CARR: Has it declined?

Mr Griew : No. The general trend is that, after a number of years, through the overenrolment period and then the implementation of the demand driven system, we had very, very high growth—five per cent-odd or thereabouts each year. That demand has tapered off since then but it is still growing. But we can take on notice to get you that.

Senator KIM CARR: Thank you. The issue of the underlying pattern of expenditure is something that has obviously been given some considerable attention. Are you familiar with the report on 17 February in The Age covering a presentation by Dr Ben Phillips at a forum at the University of Canberra on 13 February? This is about some NATSEM modelling regarding the changes in the funding environment. Are you familiar with that?

Mr Griew : Yes.

Senator KIM CARR: The proposition that Dr Phillips has argued is that the demographic trends in higher education mean that higher education costs are not in fact going to blow out, because, as a result of the ageing of the population, the proportion of 18- to 24-year-olds in the population will grow by a much smaller percentage than has been argued up until this point, compared with overall population growth, so the higher education costs are set to decline from 0.6 per cent of GDP to 0.5 per cent of GDP by 2050. Are you familiar with that presentation?

Mr Griew : I have a different report of that presentation in front of me, off news.com, and it does not go to that point. It goes to a different part of his argument, so I would hate to do him the injustice of commenting on a part of his argument that has not been reported in the media that I have read.

Senator KIM CARR: He argues that there is a change in demographics which means there will be fewer young people as a percentage of the population and, as a consequence, we need to reconsider the demand levels in the system. What do you say to that?

Mr Griew : The argument that young people are a lower proportion of the population seems reasonably uncontroversial, over time. What was the conclusion that you reported that he drew from that?

Senator KIM CARR: The conclusion was that the percentage of education's call on GDP will actually fall from 0.6 per cent to 0.5 per cent.

Ms Paul : I am not aware of the number, the percentage, but it may be the case that young people are becoming a smaller percentage of the population because, as we know, the population is ageing. But in the schooling sector, for example, we know that enrolments are continuing to increase because there has been, in effect, a baby boom—if you want to call it that—an increase in fertility, in recent years. In absolute numbers, the number of young people is increasing. As I have not seen that research, I do not want to comment on that—it would not be fair to the author—but it is certainly the case that enrolments in the schooling sector are growing. Obviously, particularly because it is now a demand-driven system in higher education, I would imagine that will translate into increasing enrolments. I have no idea whether he took that into account.

Mr Griew : The other thing is there is a proportionality thing here. We would want to look pretty closely at the numbers there because there is a baby boom now washing through the school system towards the higher education system. Also, while there is an ageing of the population, the notion that it will make that drastic a change to outlays does not initially appear plausible to me. We would want to have a look at the numbers.

Ms Paul : We would need to have a look at the report.

Senator KIM CARR: I might suggest that it might be appropriate to have a conversation with NATSEM about this.

Ms Paul : Sure. We would be happy to.

Mr Griew : I am sure that the intergenerational report coming up may touch on some of these issues. I am equally sure it will highlight that one of the challenges we face is that the proportion of working-age taxpayers will be in decline in future years, which puts pressures on all aspects of government services as well.

Senator KIM CARR: When do you expect this growth in your population to hit the universities? It is 10 years away, isn't it?

Ms Paul : Not necessarily. There has actually been a consistent growth in enrolment in schools. I actually like your suggestion of talking to NATSEM. I am quite happy to sit down with them. We know that the enrolments in schools are driving quite a significant increase in outlays in schooling. They are being driven by enrolments.

Mr Griew : I have two comments to make in response to your question. The increase in birth rate I think would suggest that there is an increase which is less than 10 years away in the school-leaver population. And of course more than half of the enrolments now are coming from mature age students as well. It is not quite as simple as being purely a youth-phenomenon demand for university places.

Senator KIM CARR: What Dr Phillips does argue though is that the particular concern relates to the blow-out in student debt. I notice that you highlight at page 43 that there appears to be quite a significant change in the provision of HELP loans for higher education students. Is that right?

Mr Griew : That is correct. We are anticipating an increase in HELP loans both as a result of the number of students coming through the system as result of the demand-driven system and growth. The estimates here, as we have discussed before, are based on agreed work between us and the Department of Finance on the level of loans.

Senator KIM CARR: If you have a look at the bottom line of the table, that is a significant variation in the number of places for which VET FEE-HELP loans are paid, isn't it? There is a 30 per cent increase in the space of 10 months.

Ms Paul : Absolutely. We have talked about that before. This is a reflection of the extension to the public system by the former government in 2012. That is absolutely right. The growth has been extremely significant, but it was off, in effect, a zero base.

Senator KIM CARR: But that is not the issue. This is about what you said to the parliament 10 months ago. It is not a zero base there. In the budget for 2014-15, it was 172. It has gone out to 225.

Ms Paul : Sorry, I was talking about the growth from 2012.

Senator KIM CARR: If I look on page 42, total program expenses have moved by, over the forward estimates, $5.9 billion. Is that correct? I have here revised budget estimates and forward one, two and three years—it is $5.9 billion, is it not?

Mr Griew : What is expensed here are the expenses of running the loan system, so there isn't a movement here of that order. It is a significant movement but this is the amount of the expense each year.

Senator KIM CARR: If you think my figures are wrong, what do you say?

Mr Griew : It is just that you have added these up as if that is the level of movement

Senator KIM CARR: What do you say the number is then, if you don’t like my maths?

Mr Hart : In term of the expenses on a financial year basis there are a number of factors that determine what the HELP expenses will be. It includes the deferral costs; the difference between the bond rate the government borrows at and the indexation at CPI; there is also in the case of HECS up-front discount as well as the bonus payment along the way. You will see that there is an increase across the forward estimates and that is as a result of adjustment that occurred at MYEFO from going back from the bond rate to the CPI measure, which the government included in the bill that is before the parliament.

Senator KIM CARR: What is the total amount of the blow-out?

Mr Griew : Blow-out is not what Mr Hart just explained. What he just explained is an estimates revision as a result of a policy change.

Senator Birmingham: Unless you are suggesting, Senator Carr, that you would rather the interest rate on HELP debts would apply to the bond rate.

Senator KIM CARR: Again I would urge you not to be a smart alec here because you will find that it is not helpful at all. I have asked a direct question and I would expect a direct answer.

Senator Birmingham: You got one, Senator Carr.

Senator KIM CARR: No I did not.

Senator Birmingham: I am sure he can repeat the facts if you did not understand them the first time.

Senator KIM CARR: Can you explain to me, then, what is the cause for the $1.5 to $ 2.3 billion variation? You will tell me that it is a policy change—is that what you are saying?

Mr Hart : The costs there are just an estimate in relation to administering the HELP scheme and that is the cost to the Commonwealth in relation to advancing loans to recipients. We have different information that you might be interested in in terms of the total value of the HELP asset, of all the loans combined. Is that the information you are seeking.

Senator KIM CARR: Yes I am.

Mr Hart : As at 30 June 2014 the fair value, which is the amount that the Commonwealth expects to be repaid in HELP loans, is $25.1 billion. It is treated as an asset to the Commonwealth.

Senator KIM CARR: Yes, I appreciate that.

Mr Griew : The number of students receiving loans has, as your last set of questions indicated, increased significantly.

Senator KIM CARR: And that accounts for the program expenses of $1.5 million to $2.3 billion in the revised budget estimates and then from there to $2.8 to $3.5 to $4.3 billion. How do you account for that variation?

Senator Birmingham: The cost of reversing the bond rate indexation measure that was proposed in the initial higher education reforms and removed from the legislation that is now before the parliament in favour of a return to CPI, with I note the generous provisions Senator Madigan negotiated for families, is estimated to be $3.2 billion over the forward estimates. I will let officials correct me if I am reading the briefing wrongly. That is the cost of making the change back to CPI.

Mr Griew : The measures on page 16—the higher education reform amendments—of which there are a number, are totalled in there. A significant proportion of that is on page 16. There is a line that has $425 million, $591 million, $754 million and $913 million.

Senator KIM CARR: I see that.

Mr Griew : Those are costs that are significantly driven by the change from bond interest rate to CPI interest rate, which have been included in this document and are accounted for in the revised budget. So the figures on page 42 include both the growth in the program—

Senator KIM CARR: In the number of students plus the variation?

Mr Hart : For the students taking out the loan, plus the reversal.

Mr Griew : Plus the cost of the discount.

Senator KIM CARR: I am still having trouble following this, because in the previous estimates wasn't it the case that they vary quite substantially beyond that? What was the cost of the discount?

Mr Hart : The cost of actually going from—

Senator KIM CARR: Bond rate back to CPI? What is the cost of that.

Mr Griew : That is page 16.

Ms Paul : Mr Griew is pointing out page 16.

Mr Griew : Which does include some other elements. Let me be clear. We can take it on notice. But that includes the number of changes—

Ms Paul : Of which the most significant by far was—

Senator KIM CARR: So why don't you tell me what the other changes are, the most significant being the backing-off from the bond rate? What other factors were there?

Ms Paul : The next one down is the structural adjustment fund that was announced as part of the new bill.

Mr Griew : But there is also the amendment from Senator Madigan. So there is a number of different changes.

Ms Paul : Remember, too, that the interest rate on HECS-HELP is now not only reversed back to CPI in this bill, but also has a five-year point where even CPI is not charged for parents of—

Senator Birmingham: It is frozen—

Senator KIM CARR: How much is that worth? Where do I find that?

Ms Paul : The cost of that would be included in the overall costs.

Senator KIM CARR: How much is that specific item.

Senator Birmingham: It is $172.2 million, as against for the measure reversing the bond rate to CPI, which is $3.168 billion.

Senator KIM CARR: What then is your projection on the non-repayment rate?

Mr Griew : We have answered that before.

Mr Hart : For the debt not expected to be repaid? Our latest information is that the VET not expected to be repaid on new loans is 17 per cent.

Senator KIM CARR: So it remains at 17 per cent?

Mr Hart : Yes. We engaged the Australian Government Actuary to assist us in providing an update to those measures annually. So we would expect to do the next update at the end of this financial year.

Senator KIM CARR: If I could have ED0725_15. Is that possible. I understand that you provided me with an answer that actually moved that to 22 per cent.

Mr Griew : Over the forward estimates we expect it to go from 17 to about 22.

Mr Hart : I think 23 was the number.

Senator KIM CARR: And are you expecting it to stabilise at 25 per cent?

Mr Griew : I think that is the evidence we have provided before. I would have to confirm that.

Mr Hart : That is our best estimate at this point in time, but we revise those annually based on expert advice.

Senator KIM CARR: What is the basis for your estimates in that regard.

Mr Griew : The Australian Government Actuary advises us.

Senator KIM CARR: So it is entirely on that basis. You indicate in ED0718_15 that future HELP scheme expenditure for 2014-15 was not intended to be a prediction of course fees. Did you model that?

Mr Griew : For 2014-15?

Senator KIM CARR: Expenditure for 2014-15.

Mr Griew : If I understand the question, in the government's legislation in the academic year 2015 fees remain regulated in the same way in which they are now.

Senator KIM CARR: So what is the basis of your calculation in the out years?

Mr Griew : As we have answered previously, the work that we have done with the Department of Finance to project fee levels, which then worked through all of the estimating algorithms that produced the estimates.

Senator KIM CARR: Sorry?

Mr Griew : For budget purposes we and the Department of Finance agreed a set of estimates of fee levels at an aggregate level, and then, with all the data we have, calculated those through to levels of loan repayment rates and so on. That work is also then worked through with the Actuary. So it is a two-stage process of us working out the numbers with Finance and then checking the implications for HELP estimates accounting with the Australian Government Actuary. It involves estimating repayment rates and so on.

Senator KIM CARR: Turning to ED0709_15, which relates to two pieces of correspondence that have been sent to universities in relation to the application of an efficiency dividend in 2014, advance payments under the Commonwealth Grants Scheme. I have the two letters here. One is dated 7 May, and was signed by a Mr Warburton. The other is dated 28 October 2014, and was signed by Ms Birmingham. In the letters it is indicated that the payments for designated and non-designated courses of study had amounts withheld for an efficiency dividend on the basis that the government was intending to progress legislation. If that legislation is defeated in the Senate—and there is every expectation that that will be the case—when do you expect to have to repay universities?

Ms Paul : I think we talked about this last time, too.

Senator KIM CARR: Yes, we have. We are now closer to the said date.

Mr Hart : That is correct. The payments have been withheld. The reason that was done was to not actually cause, should the bill be passed, an impost on institutions to repay those amounts that they had already received. So they have been withheld and the money is available should it need to be repaid. We will have further estimates from institutions around May in terms of their student load. But this is all subject to the passage of legislation, which is a matter for the government.

Senator KIM CARR: It is a matter for the parliament, actually. Governments do not pass legislation. Parliament is engaged in that process.

Senator Birmingham: Senator Carr, we need to be clear here—and, again, officials can tell me whether I am right in this regard—the efficiency dividend does not necessarily relate to the higher education reform package of legislation—

Senator KIM CARR: It is in the bill.

Senator Birmingham: Is it? Is it in that bill or is it in separate legislation? Because, of course, aspects of the efficiency dividends we are talking about are efficiency dividends that your government had sought to apply.

Senator KIM CARR: They have already been rejected, Minister, on several occasions by the parliament. The government has sought to incorporate them in the bill. The point I was making—

Ms Paul : The minister is correct. It was in different legislation.

Senator Birmingham: So they have been rejected in different legislation already. They were, of course, your government's efficiency dividends, Senator Carr.

Senator KIM CARR: I have made it clear to you that when you ratted on the Gonski deal we walked away from it, and that is essentially what the situation is. Universities are entitled to this money, and I understand it has to be paid—

Senator Birmingham: You did not think they were entitled to it before, Senator Carr.

Senator KIM CARR: You would be surprised what I thought.

Senator Birmingham: Your government did not think they were entitled to it, Senator Carr. You went to the last election saying they were not entitled to it.

Senator KIM CARR: On the 8 May 2014 pay date, is that the date on which moneys should flow?

Mr Griew : I think the answers that Mr Hart has given is that the May update leads us to make the calculation that if a payment is necessary it would happen by the end of the financial year.

Senator KIM CARR: Sorry. Your letters actually state, 'Payments will commence from 8 May.' That is not correct, is it?

Ms Paul : Mr Griew has just said by the end of the financial year.

Senator KIM CARR: Yes, but 8 May is the date in the letters.

Ms Paul : It is not necessarily a contradiction.

Mr Hart : Senator, are you referring to 2014?

Senator KIM CARR: Yes, 2014 is the first letter. Has that money been paid?

Mr Hart : No moneys have been repaid to institutions at this point in time. So, come May, we will have a better indication from institutions about their actual student load for 2014, which would allow an appropriate reconciliation to repay those amounts should that be the approach.

Senator KIM CARR: Okay. My question goes to the date at which that is due.

Mr Hart : The date at which the money is due to be—

Senator KIM CARR: Paid.

Mr Hart : It is subject to a decision by the government—my apologies, the parliament. We would not want to repay funds ahead of a decision being made that withdrew that money further.

Senator KIM CARR: I want to be clear about this: when the parliament rejects this bill a second time, are you required by law to pay that money to the universities?

Mr Hart : We are not required by law.

Senator KIM CARR: Why is that?

Mr Hart : That is the nature of how the act works, but—

Senator Birmingham: Sorry. I want to get some clarity here about which efficiency dividends we are talking about and which bills. When talking about withheld payments, we are presumably talking about payments in the current financial year, which would have been subject to the 2014 efficiency dividend.

Mr Hart : It is a calendar basis, Senator. So it is two per cent for 2014.

Senator Birmingham: The efficiency dividend 2014 and the 2015 efficiency dividend—

Mr Hart : Is 1.25 per cent.

Senator Birmingham: Are those efficiency dividends in the higher education reform bill?

Mr Hart : They are.

Senator Birmingham: Are they?

Mr Griew : From 2016. It is a separate piece of legislation that would enact them for the period up to then.

Senator Birmingham: Thank you, Mr Griew. There is a separate piece of legislation that enacts those efficiency dividends for 2014 and 2015, Senator Carr.

Senator KIM CARR: It is on the Notice Paper. Have those measures been rejected by the Senate before?

Senator Birmingham: I do not believe so. I think, like many things—

Ms Paul : They are still on the Notice Paper.

Senator KIM CARR: No. Have those measures been rejected by the Senate before?

Senator Birmingham: Has the HESA bill dealing with the 2014 and 2015 efficiency dividends—

Senator KIM CARR: No, there have been separate attempts to impose these reductions and they have been rejected by the Senate on previous occasions.

Senator Birmingham: Senator Carr, you are talking about the 2014 and 2015 efficiency dividends. They are in the HESA bill, not the higher education reform bill.

Senator KIM CARR: We can go round and round in circles—

CHAIR: This needs to be clear, Senator Carr.

Senator Birmingham: Senator Carr, you have got up on your high horse before telling me how I was wrong; it turns out I wasn't. Senator Carr, I want to make sure we are perfectly clear on this.

Ms Paul : The efficiency dividend that we are talking about here is the one that was proposed by the former government. There were some aspects of it which were subject to a disallowable instrument, and that is what was rejected.

Senator KIM CARR: Yes.

Ms Paul : It is exactly as the minister described: the amendments for the efficiency dividend for 2014 and 2015 were in the HESA bill which has not been rejected or passed. From 2016, it is subject to the reform bill.

Senator KIM CARR: Thank you.

CHAIR: Thank you for that clarification.

Senator KIM CARR: My point is: at what stage are you required to repay the moneys withheld?

Ms Paul : I think Mr Hart's evidence has been pretty clear that we have advised universities quite clearly that we will make this consideration. This is only in the circumstance for the future efficiency dividend from 2016 if the reform bill does not pass. We are not here making any judgement about whether that will pass or fail. We have said clearly that, if it were the case that we were in a position to need to make repayments, we would do it before the end of the financial year.

Senator KIM CARR: Previous moneys that have been withheld, when are they due for repayment?

Mr Griew : If the bill with the efficiency dividend in it for 2014-15 does not pass by May, we will then be repaying March of this financial year.

Ms Paul : We are still, in this case, talking about the HESA amendments. We are not talking about the reform bill. We need to be absolutely clear. In terms of the repayments that you have been asking about, as the minister said, we are not actually talking about the passage or failure of the reform the bill, we are talking about something completely different, which is a set of particular amendments that go to that efficiency dividend in HESA.

Senator KIM CARR: So there is a series of measures—

CHAIR: Sorry, Senator Carr, I think it is important that, when we ask seeking clarification, because there has been a bit of misunderstanding, we give Ms Paul complete time to finish her answers.

Ms Paul : Obviously we have not withheld payments from 2016. We have withheld payments from current and previous payments. Therefore the repayment, if we are in that situation that we are talking about, is subject to the consideration of the amendments to the Higher Education Support Act, not to the reform bill.

Senator Birmingham: The only moneys withheld to date are the moneys under the efficiency dividends that your government, when in office, had proposed to apply, Senator Carr, but your party, now in opposition, are refusing to support.

Senator KIM CARR: That is right, and is the case—

Senator Birmingham: That is right. Thank you, Senator Carr.

Senator KIM CARR: I make no bones about it. I am asking you: when are you obliged to pay that money. I thought what Mr Hart said before was that the department was not required at law to repay that money.

Mr Hart : There is no time limit on it, Senator, but it would coincide with the period of May where we would do the reconciliation based on the actual student load and the variation there for 2014.

Senator KIM CARR: Okay.

Ms Paul : What we do not know is how those amendments to THE HESA will go.

Senator KIM CARR: I am saying to you that the current legislation sets down payments that are required. Is that the case?

Mr Griew : The point that Mr Hart has made, just to be clear, goes to the timing of when the payment must be made. That was the point he was making. I think he has now answered a number of times that we will do the reconciliation in the latter part of this financial year.

Ms Paul : Obviously there is no particular time limit. We need clarity on the outcome of those amendments to HESA.

Senator Birmingham: Senator Carr, what I understand Mr Hart to have said is that, when the final reconciliation for 2014 occurs, then the payments that have been withheld because of the government's intention to implement the efficiency dividend, which your party had proposed in government, will be made because, yes, that is the current law. When the reconciliation occurs it will make sure that what should have happened in 2014 under the current law happens, notwithstanding the fact that, if your party had stood by what it took to the election in terms of a savings measure, those payments should not have been made.

Senator KIM CARR: Mr Hart, how much is involved?

Mr Hart : Over what period, Senator?

Senator KIM CARR: Let's start with the 2014 amount.

Mr Hart : This is by financial year basis. These are initial estimates that were done in the context of the 2013-14 budget, I believe. It was $84.9 million.

Senator KIM CARR: Okay, that is for 2014.

Mr Griew : That figure is a total figure, and bear in mind that some part of that will be implemented through legislative instruments and some part through the proposed bill. It may be best if we give you that breakdown on notice.

Senator KIM CARR: Thank you. But it is of that range, around 85 million required, and for the reconciliation.

Mr Hart : Yes, around that range.

Senator KIM CARR: Do you have a breakdown for individual universities?

Mr Hart : I would have to take that on notice.

Senator KIM CARR: Of course.

Mr Griew : We have provided you with that previously.

Ms Paul : Yes, I think we have done that on—

Senator KIM CARR: You have provided that, have you?

Ms Paul : I believe so. I am pretty sure. I thought I had seen that in a question on notice, perhaps at budget estimates; I am not sure. We will check it out.

Senator RHIANNON: This morning when we were trying to explore some of the advertising issues, I asked some questions that I would like to return to. Principle 4 of the department's guidelines for expenditure on advertising states, 'Any campaign must be instigated on the basis of a demonstrated need.' It is a quote you would obviously know well. Other than the government's desperation to pass its legislation, what was the demonstrated need for this advertising campaign?

Ms Paul : To go into the detail of this—the people who attended the open days and so on are here now, so I am more than happy to talk about it—between July and September last year, and I think we talked about this before, we attended five tertiary skills or career exhibitions and 41 open days across 36 higher-education institutes. We estimate that we probably talked to about 8,000 prospective students and their families. As I said this morning, I think, we encountered a range of misconceptions and—I am not sure what adjective I used—quite a fundamental lack of understanding, even about the current system and of the reforms.

In particular, we found there was a common misconception that the reforms would mean that the HECS-HELP scheme would be abolished and we discovered that prospective students and their families were very worried that they would have to pay up-front fees versus the current system, where not a cent has to be paid up-front; it is only after you reach earnings—if the legislation passes—over $50,000. That indicated there was a need for information in the market. The people who were there can talk in more detail, but I am advised that prospective students and families, once they heard they would not have to pay a cent up-front and the scheme would stay, were offered some amount of comfort.

Then formal market research was undertaken, which we talked about this morning. It basically found the same thing—for example, the fact that the federal government funds, under the current system, a large part of a student's course et cetera. ORIMA research found there was a very low level of understanding that there was a level of funding from the federal government or from contribution.

I do not know if you were here, but one of the quotes from that research was, and I presume they were being asked about their understanding of the Commonwealth's involvement—I am not sure what the question was—that somebody said, 'Is that about the Commonwealth Bank?' So there was quite a deal of fundamental misunderstanding about the current system and the impact of the reforms.

I am advised that this piece of market research found up to 81 per cent of respondents were unaware that HECS would remain in place with the system of no up-front fees and not a cent to be paid until you are earning a certain amount. The ORIMA research report found overall that it was appropriate for the Australian government to be conducting a campaign. Some of the people the researchers talked to in focus groups agreed with that. Apparently one of the prospective students said, 'It's important to get out there. People are worried about paying more. It's important to encourage people to still go.'

That was the nature of the context for the campaign. As I said this morning, the market research directly informed the creative for the campaign.

Senator RHIANNON: You are saying that is a demonstrated need. I understand the guidelines also state that campaign materials must not scorn the views, policies and actions of political parties or members of parliament.

Ms Paul : I am not sure the guidelines use the word 'scorn'. I do not know where that would be.

Senator RHIANNON: I do not have the number here.

Ms Paul : Naturally, I have read them carefully but it does not ring a bell.

Senator RHIANNON: I will find the quote for that and will put it down for you. I will come back to that one. Portfolio additional estimates statements set out that the costs associated with HELP debt—I am on page 40 to 43 here—are anticipated to almost treble, from about $1.5 billion in 2013-14 to $4.4 billion in 2017-18.

Ms Paul : We have just—

CHAIR: That was Senator Carr's line of questioning.

Senator RHIANNON: Was that with Senator Carr?

Senator Birmingham: That is indeed what we were going through with Senator Carr.

Senator RHIANNON: I do not want to repeat that; I can go over that one.

Senator Birmingham: We established that a very large part of that is attributable to the government removing its proposal to shift indexation to the bond rate and going back to the CPI rate. I am sure, Senator Rhiannon, you would warmly applaud that change.

Ms Paul : We might draw your attention, Senator Rhiannon—

CHAIR: Hansard: note the smile of Senator Rhiannon!

Ms Paul : Apropos the reference you are making now to page 42, I draw your attention to page 16. Under 'Higher Education Reforms—amendments' there are numbers that go $425,766,000 and $591,040,000 et cetera. We did give evidence on this to Senator Carr a while ago.

Senator RHIANNON: Okay, I'll go back and look at that.

Ms Paul : I can talk about it briefly, but you will find it on the record already. It encompasses a range of the features of the current bill, the new bill, and we have taken on notice to break that down. By far the largest portion of that is because of the return to the CPI rate of interest on HECS-HELP loans in the current bill and the new feature of a pause on the interest rate for the parents of a newborn.

Senator RHIANNON: When does the department expect the cost of HELP to exceed the cost of the Commonwealth Grant Scheme?

Mr Griew : The cost of HELP is the cost of running the HELP scheme. Around 80 per cent of student loans are repaid so, from a public-financing point of view, what you have just outlined is very unlikely to happen with any of the policies that are on the table at the moment.

Senator RHIANNON: Because the repayment level is such that, you are saying, it would not exceed it? Is that what I conclude?

Mr Griew : It is simply that the cost of HELP, as accounted for in the budget, is the cost of running the scheme. The difference between a grants scheme and a loans scheme is that, by and large, the loans are repaid.

Senator RHIANNON: That is what I am trying to assess, because a lot of them are not repaid. Is there not a point coming when the cost of HELP will exceed the cost of the CGS?

Mr Griew : The Australian Government Actuary's advice to us is that the foreseeable increase in the non-repayment rate is from 17 per cent to 23 per cent over the forward estimates, stabilising at about that upper amount—maybe a couple of points higher. The Australian Government Actuary's view is that the scenario you are talking about is not foreseeable.

Senator RHIANNON: So they are not converging.

Ms Paul : I think we might have said this before, but we should also add that the numbers you are looking at on page 42 include the whole range of HELP schemes—VET FEE-HELP et cetera. That is on the next page.

Senator Birmingham: I think the top right-hand part of page 38 of the portfolio additional estimates statements shows the Commonwealth Grants Scheme expenditure for 2014-15 to be estimated at close enough to $6.5 billion. We were just looking at the cost of administering HELP, which is $2.3 billion. So there is a fair disparity between the two at this stage.

Senator RHIANNON: How far into the future, Mr Griew, have your actuaries projected in order to conclude that we do not have a trend that is converging? Periodically this is said to me—that this will happen, that there is a convergence here. I understand that you have said your actuaries have looked at it and that that trend is not occurring, according to them. I am just wondering how far into the future they have made this assessment.

Mr Griew : The actuary's estimate that I was referring to was the non-repayment rate, which is an essential component for estimating the cost of the HELP scheme. We and Finance estimate together the cost of the HELP scheme and then we get the actuary's sign-off on that. We do that up to the end of the forward estimates period and the government publishes that in the budget papers. But, if you look at the distance between those two figures, it is very unlikely the kind of convergence you are raising will occur.

Senator Birmingham: In the final year of the forwards, HELP—

Senator RHIANNON: What page are you on now, please?

Senator Birmingham: Page 42, where you started. In the final year of the forwards, the estimated cost of HELP comes in at $4.368 billion, which is still more than $2 billion less than the budgeted 2014-15 CGS figure.

Mr Griew : And that includes all of the HELP schemes.

Senator Birmingham: Mr Griew is correct. That includes VET FEE-HELP, SA HELP and so on. If there were to be a crossover point at some stage in the future, it would certainly, based on those sorts of trajectories, be well into the future.

Mr Griew : Beyond the forward estimates.

Senator RHIANNON: But you are saying that that convergence could happen?

Mr Griew : No, we are not making that comment.

Ms Paul : Not at all.

Senator RHIANNON: I thought that you said—

Mr Griew : That is not what Mr Griew was saying when he said, 'Beyond the forward estimates'.

Mr Griew : We are very confident of the figures through the forward estimates—because we calculate them with the Department of Finance and the Australian Government Actuary. They are published and that is the basis of the government's financial bills that go before the parliament.

Senator KIM CARR: But the rise is quite substantial in the space of 10 months. How can you be so confident what they are going to look like in three years?

Mr Griew : We revise them to take account of actual information that comes in. The VET FEE-HELP scheme, which is the one you referred to, is a new scheme which was coming off a low base with a sharp incline in its take-up, and that is a circumstance where you are always particularly vulnerable to the estimates changing as real figures overtake estimates. But the HECS-HELP scheme and the FEE-HELP scheme that is being incorporated into it are mature programs, the dynamics of which we understand much better and are not so volatile.

Senator RHIANNON: But haven't the figures for 2017-18 doubled since 2014-15? Isn't a that correct reading of page 42?

Mr Hart : I think that was the discussion we had with Senator Carr before about the expense in relation to HELP. What you will see included there is, basically, the debt that is not expected to be returned on a financial year basis, deferral costs, which are basically the opportunity cost that the Commonwealth wears in the difference between the bond rate that it borrows at and the concessional indexation rate that is applied to HELP loans. It also takes into account up-front discounts for HECS of 10 per cent and bonus repayments of five per cent. So the difference that you will see over the financial years there is a direct relationship to an expectation that there will be more loans taken out and also as a result of the fact that at MYEFO the government reversed its decision in relation to the bond rate versus the concessional indexation rate. Therefore, you will see that flow through in the expenses from 2014-15 to 2017-18.

Senator Birmingham: The government makes no secret of the fact that the cost of the HELP schemes increases over time and, if you are thinking that is a problem, the only ways to deal with that problem are either to have fewer student loans, which presumably means fewer students in higher education, or to make those students pay more and have the taxpayer loan less, or to make people repay at a higher rate. So the reality of the schemes we have at present, with the government's current policies that are before the parliament, is that that is the increasing trajectory of the cost of operating the HELP programs. If you want to change that trajectory of the HELP programs, you really have to contemplate one of those three measures.

Senator KIM CARR: That is just not right.

Senator Birmingham: Please, I would like to hear the other alternative.

Senator KIM CARR: We are not interested in your pompous pontification.

Senator Birmingham: I know, Senator Carr, you are quite keen to reintroduce student caps or capped demand, so your answer is fewer students studying, isn't it?

Senator KIM CARR: You are obviously keen to sit here for a considerable time. If you keep going on with this blather, that is what is going to happen.

Senator Birmingham: I am interested to know. You say there is another way. Indeed, reading between the lines of all of your public comments, it seems your preferred way is to remove the Gillard government reform to uncap demand.

CHAIR: Senator Leyonhjelm.

Senator Birmingham: Apparently Senator Carr does not want to clarify that.

Senator KIM CARR: I am not interested in engaging in your drivel.

Senator Birmingham: You are obviously not misleading the—

CHAIR: We have a limited amount of time, Senators.

Senator KIM CARR: You are making a fool of yourself again.

Senator Birmingham: Last time you said that, it turned out to be wrong.

CHAIR: Senator Leyonhjelm.

Senator LEYONHJELM: My questions might be quick because you may have to take them all on notice, so we will see how we go. I know you had some earlier questions and I am hoping that I do not duplicate anything. I am told I am not, but tell me if I am.

Ms Paul : We will let you know.

Senator LEYONHJELM: Thank you. Ben Phillips of NATSEM has presented an analysis suggesting that, if higher education fees rise by various amounts, the proposed current education reforms would hurt the taxpayer because the taxpayer will fund the higher amount of concessional HELP loans. Under one scenario, higher education fees rise by as much as government subsidies fall. Is this a reasonable assumption?

Mr Griew : It is important to make the point that, if the bill passes, that will be a decision for every individual university. The evidence that we have, for example, from La Trobe University or Queensland University of Technology is that they will make those decisions in a fairly calibrated way and there are a number of courses for which both those universities have indicated they would not do that—that, in fact, their fees would increase by lower amounts. It really is too early to say that.

Ms Paul : We had bit of a discussion about it this morning. Many of the scenarios that have been put about by various organisations, whether from institutes or the Greens website, for example, and so on, start from having to make assumptions. Yes, as Mr Griew is saying, there are a range of views in the sector about where that might sit.

Senator KIM CARR: You mentioned La Trobe University. When did they provide that advice?

Mr Griew : I do not have the date on me, but they indicated that for their early entry students they would limit their 2016 charges to 10 per cent increases. That would be on average—

Senator KIM CARR: The vice-chancellor said that, did he?

Ms Paul : Yes, he did. That was quite a long time ago. I think it was the first announcement of this nature.

Senator LEYONHJELM: I assume your answer is that you are dubious about that assumption. That is all I was seeking.

Mr Griew : Yes.

Senator LEYONHJELM: Another scenario is that higher education fees rise in line with historical growth in childcare fees. Is that reasonable?

Ms Paul : They are two completely different markets. Childcare fees have generally—

Senator LEYONHJELM: I did not suggest they were linked; I just want to know if it is reasonable to assume—

Ms Paul : I cannot see why it would be a reasonable assumption offhand, but I have not seen that piece of work.

Mr Griew : There is no regulatory driver there—I just make that observation.

Senator LEYONHJELM: Under one scenario, higher education fees rise in line with historical growth in school fees. Is this a reasonable assumption?

Ms Paul : They are also completely different markets.

Senator LEYONHJELM: So you are saying that is probably not a reasonable assumption?

Ms Paul : I would have thought it would be hard to draw a parallel, but, to be fair to the author, we would have to look at the research and see what the assumptions were and so on. From my own knowledge of those two sectors, childcare fees generally reflect wage increases of a completely different type of wage group than universities, obviously.

Senator LEYONHJELM: That is exactly my point.

Ms Paul : School fees, I know, have a massive range. Government schools are not allowed to charge fees, although they can ask for voluntary contributions. Fees in the Catholic system, which is two-thirds of the one-third that is non-government, range but they have generally what one might call reasonably low fees, and they move over the years for quite different reasons. The Catholic system has a mission based approach to how it sets fees. The independent sector, which is the one-third of the one-third that is non-government, set theirs according to the nature of the school, what the school is offering, what the parent community can bear and the market they are operating in. Perhaps that would be the part of the schooling sector in which you could see a market. With all of those things, really, I cannot think of any particular parallels with the higher ed market, but, to be fair to that author, we would need to have a closer look at it.

Senator LEYONHJELM: Another scenario is whether higher education fees might rise towards higher education fees seen overseas. Is that a reasonable assumption?

Mr Griew : Do you mean charged by universities overseas or Australian universities charging overseas students coming here?

Senator LEYONHJELM: Higher education fees in Australia would rise to become comparable with international student fees.

Mr Griew : It is interesting. The last three scenarios you have mentioned—and I certainly have been involved in lots of scenarios that people particularly talk about or draw connection with—

Ms Paul : No we had not heard that before

Mr Griew : Australian universities are part of an international market for internationally mobile students, and they are all very conscious of each other's price in competing with the internationally mobile student. But I do not think Australian universities would be looking overseas to compare; they would be looking at each other more than overseas.

Ms Paul : If you were talking about international students in Australia, that is a different matter, and we did talk about that his morning. You are talking about what universities in the UK charge. The advice generally in our conversations with the sector is that they are going to be competing with each other. The systems are entirely different. For example, while there has been much written about the supposed Americanisation of Australian universities under these reforms, the American system is entirely different. As you know, there is not a income-contingent loan system, for example.

Senator LEYONHJELM: This is not a gotcha. Would it help public debate on higher education reform if the department released estimates of possible increases in higher education fees using various assumptions?

Ms Paul : We have actually spoken about this quite a lot on evidence and on questions on notice and said that it is absolutely not in anyone's interest for us to be putting forward any numbers which could give any indication to a market.

Senator LEYONHJELM: Would it be possible to impose a real rate of interest on new HELP loans while retaining the existing indexation arrangement for existing HELP loans? I apologise if this has been asked before. Would this reduce the likelihood that fee deregulation could generate a net cost to the taxpayer? Grandfathering, in other words.

Ms Paul : Those sorts of policy approaches are always technically possible. That is not what is proposed under the reform bill.

Senator LEYONHJELM: The question was would it be possible. It would be possible?

Ms Paul : Yes, the grandfathering approach is technically always—well, usually always in my experience. But, as you know, that is not what is proposed.

Senator LEYONHJELM: No, I am aware of that. I am also aware that the minister keeps talking to me. Ideas are circulating.

Senator Birmingham: He is willing to talk to anybody. If you would like to talk to him again tonight, I will text him now. I hear he's very good at texting too!

Senator LEYONHJELM: You needn't bother. I had a short discussion.

Ms Paul : Both bills, including, obviously, the current bill, go to grandfathering of enrolled students, for example. It is quite a complex matter to do technically in terms of IT and so on, but it is entirely possible in a policy sense. You will recall that there is a fundamental grandfathering of anyone who is enrolled or deferred on budget day 2014.

Senator LEYONHJELM: Yes, the argument was about planning.

Mr Griew : On your question about whether it would help debate: as someone who has many times had to resist providing that sort of information, I do not think we would have the different fee announcements that we now have from three different universities if we had said, 'This is, in effect, what the government expects.' The three different announcements so far are different fee levels, so protecting differentiation and price points in a deregulating market is not a trivial matter.

Ms Paul : We certainly gave evidence in the budget estimates last year that, in the circumstances where governments have raised to an announced level, universities have gone up to that level and stuck there. That actually happened in this country in the early 2000s—

Senator LEYONHJELM: UK too.

Ms Paul : and more recently in the UK. The UK experience is absolutely that universities have raised their fees, whereas we are already seeing exactly what these reforms should allow, and that is announcements that really range across a wide range of possibilities.

Senator LEYONHJELM: Final question: public discussions of higher education reform has included a claim that the reforms particularly advantage those students who go on to earn less income throughout their career because, compared to those who earn more income, they will have a debt for longer. I find this confusing because the lifetime value of debt repayments will be lower for those who earn less income throughout their career compared to those who earn more. Is my understanding correct?

Mr Griew : That is not quite correct. The level they repay will be lower because the amount that a student is required to pay annually is linked to their income, but a student who earns more money will have more money both net of their repayments and in gross terms and they will repay faster. But there is in the Australian education system—and you would expect this to continue—a correlation between the amount you pay for your degree and the income you earn, and that is certainly what QUT, for example, in their fee announcements were clearly very conscious of.

Senator LEYONHJELM: Is there any disadvantage in having a debt for longer? It seems to me that the terms of the loan—

Mr Griew : Not with this loan.

Ms Paul : Indeed, at zero and the pause for parenting a newborn, no.

Mr Griew : And with income rated repayments.

Senator LEYONHJELM: Okay, I am clear on that. Thank you very much.

Senator Birmingham: If people had a choice, they would certainly pay off their home first.

Senator LEYONHJELM: I was going to say, if I could get a home loan on the same terms as a HELP loan, I would be pretty leased.

Ms Paul : There have been many commentators who have made that point.

Senator LEYONHJELM: Have they? It is not original.

Ms Paul : It is no doubt original, but there have been commentators who have made a similar point!

CHAIR: Senator Carr.

Senator KIM CARR: I have some numbers here that might correct some of the things that you have presented. NATSEM have suggested that estimated prices for selected courses would represent an increase of prices of 18 per cent for a cost recovery model, 102 for an international fees model—that is on international students studying in Australia—and that QUT and Western Australia have released prices for a limited range of courses. Matching these up like-for-like with current fees suggests Queensland University of Technology price increases of 42 per cent and University of Western Australia increases of 95 per cent. On the base of 2016, these overall price increases would be well above cost recovery and likely below the international level. Over a 10-year period, the average inflation for childcare prices has been 7.7 per cent, for secondary schools 6.3 per cent, for primary schools 5.5 per cent and for higher education 4.7 per cent. So I do not think a suggestion was being made that there was a direct comparison but rather that these were the price movements and that, if you look at the various models—

Ms Paul : Are they all NATSEM models you are referring to?

Senator KIM CARR: They are all NATSEM models. I am just suggesting that some of the stuff that has been presented here today is not the way I recall the presentation. I suggest that, if the department wants to take them up, they may wish to actually get the data directly.

Ms Paul : Yes, we said we would be happy to talk to them.

Senator KIM CARR: I do not think it would be fair for you to represent what is being said as a reflection of Dr Phillips's point—

Ms Paul : I said that. I was very careful to say that, actually. I will also make the point now that you have read that piece, which I have of course not seen, about a comparison to the childcare market and school fees stands. Indeed, it is probably underlined—

Senator KIM CARR: You specifically talked about the inflation rate for fees in those sectors.

Ms Paul : That is right. I was going to go on to note that the one huge difference between markets—among many—is there no income contingent loan arrangement. Of course, all these fees are up-front fees. They are pay-as-you-go rather than not having to pay a cent until you are earning more than $50,000.

Mr Griew : I will make a point as well. I was not commenting on Ben Phillips's work; I was not there. If somebody is summarising QUT's increases as 42 per cent, they are not doing justice to QUT.

Senator KIM CARR: I would not say they are justice, but that is another issue. What is also said—

Senator Birmingham: Mr Griew, Senator Carr made a lengthy statement before particularly touching on QUT and UWA fees. Is there anything you need to add in relation to that?

Mr Griew : I am just conscious that of the 20 courses for which they have put fees out—and it is absolutely correct to say that is not all of their courses—they range from increases that are a lot less than that—

Senator KIM CARR: The average course costs are what was presented.

CHAIR: What is the range? Sometimes averages are not the best way to describe something.

Mr Griew : And technically you cannot do an average without knowing where the students are.

Senator KIM CARR: I want to come to the substance of what you have said, which is what you have not done.

Mr Griew : In education, for example, they are projecting an increase from $26,000 to $33,000. That is not a 42 per cent increase.

Senator Birmingham: And it is significantly below international fees.

CHAIR: Thank you for those two points. We seem to have several conversations. Senator Carr, you have the call.

Senator KIM CARR: What is also said is that the HELP debt increases from $25 billion to $52 billion. The increase in 2017-18 alone is 25 per cent. I believe you have confirmed that figure tonight—$41.5 billion to $52 billion. The budget for 2014-15 projects unpaid HELP debts to increase from 17 to 23 per cent by 2017-18, and the budget projects HELP costs to increase from $1.3 billion in 2014-15 to $2.33 billion in 2017-18. This estimate is from NATSEM:

… a doubling of HELP debt over 2014 figures, and an increase of bad debt from 17% to 30% … would lead to an annual HELP budget of around $5 billion compared to $2 billion today …

That is assuming a bond rate return to normal levels. In other words, the proposed savings that the government is making on the Commonwealth Grant Scheme are wiped out by the increases in the debt levels. That is the proposition that was actually put. Can I turn to the issue of—

Senator LEYONHJELM: There is another issue too, and this is where I was heading with my question as to whether it would be helpful to do some analysis and release some analysis for discussion, although I accept your point about not wanting to price-signal.

Ms Paul : Yes.

Senator LEYONHJELM: One of the things that concerned me—perhaps me more than Senator Carr—is a point made by one of the other speakers at the seminar where Dr Phillips presented his findings, which was that he did not regard the price signalling as working the way that a normal market would work, because of the presence of the HELP system. Therefore the normal price competition which you would expect—and which I have been eagerly anticipating, to be honest—may not be all that active. I am just interested in whether you have any thoughts on that.

Ms Paul : You need to look at the reforms holistically to think about this. For starters, of course, prices have never been able to be a factor competed against.

Senator LEYONHJELM: So far.

Ms Paul : That is an inelegant way of saying students have never been in a position to be able to compare price. I will come round to your points. So it is important to know that one of the essential parts of the reform is the quality indicators of learning and teaching and the new transparent way of universities actually having to show outcomes, fees, employment outcomes and so on. So the provision of market information to prospective students is a very, very important mechanism in itself.

Secondly, of course, the two planks of the reforms that tend not to be talked about so much are the extension of Commonwealth grants funding for the first time to private higher education providers, which clearly will produce a downward pricing signal on universities, and the extension of Commonwealth funding for the first time to sub-bachelor higher education qualifications, which extends the reach to a wider range of institutions, institutional join-ups, vocational higher ed join-ups et cetera. This is particularly useful in a region, for example. Those two things not only deliver pricing signals but also create a broader and more buoyant market. All of that will be reflected to prospective students through the transparency of really good market information.

In terms of the pricing signals from HECS-HELP, yes, it can be that students may be able to tolerate more, but of course they are paying CPI or no interest at all, so that is good for the student.

In terms of your point, which is getting to how universities might set prices, so far we are not seeing a break-out, because they are all, clearly, so they say—I could quote them; you do not have to take it from me—looking to each other quite carefully about where they may go. It was interesting, as an example, that the very first announcement—I am not sure; I think you were here when we mentioned it—was by the vice-chancellor of La Trobe, who said quite early on in the piece that, if the forms got through et cetera, he would raise fees for early-entry students by 10 per cent.

Senator KIM CARR: Can I turn to the issue of NCRIS funding?

Ms Paul : Sure.

Senator KIM CARR: Have you got the officers there for that?

Ms Paul : Yes we do.

Senator KIM CARR: How many facilities and projects are currently supported by NCRIS funds.

Ms Paul : Yes. We should have that.

Senator KIM CARR: We will see how we go depending on the length of the answers.

Mr English : There are currently 27 facilities that NCRIS supports.

Senator KIM CARR: How many separate infrastructure locations does this comprise?

Mr English : There are 222.

Senator KIM CARR: Can you confirm that NCRIS facilities employ more than 1,500 technical experts, researchers and managers?

Mr English : I can. Our current estimate is 1,700.

Senator KIM CARR: Is that correct, or is it 1,500?

Mr Griew : Our current estimate is 1,700.

Ms Paul : We have given the 1,500 figure before. The updated estimate is 1,700.

Senator KIM CARR: Is it correct that the network supports around 30,000 researchers both here and overseas?

Mr English : We have updated that figure as well with more data collected recently and we now think it is 35,000.

Senator KIM CARR: Is it correct that $2.5 billion in taxpayers' money has been invested in the NCRIS infrastructure since the program was established under the Howard government?

Mr English : That is correct.

Senator KIM CARR: Can you tell me whether or not it is true that this is leveraged from state governments, industry, universities, research agencies and the like at a rate of $3 for every $1 of Commonwealth investment?

Mr English : We typically refer to the figure of another billion dollars of leverage over and above the $2.5 billion that—

Senator KIM CARR: So you are saying one for one. Universities Australia is saying—

Ms Paul : No.

Mr English : No, it is 2.5 to one.

Senator KIM CARR: It is 2.5.

Mr English : Yes.

Ms Paul : It is 2.5 from government and leveraging another one.

Senator KIM CARR: I see. So around the other way?

Ms Paul : Yes.

Senator KIM CARR: I would say to you that Universities Australia is asserting that it is $3 leveraged for every $1 from the Commonwealth. You think that is wrong?

Mr English : I am not sure.

Ms Paul : We best have a look at that.

Senator KIM CARR: Fair enough—you dispute that. How much of that would come from overseas?

Mr English : I would have to take that on notice and interrogate our data.

Senator KIM CARR: I am talking about overseas research agencies. My recollection is NASA and a few others—

Ms Paul : That is right.

Mr English : There are certainly some good examples.

Senator KIM CARR: including the European Space Agency.

Mr Griew : There are serious overseas players engaged in several of these capabilities.

Senator KIM CARR: How many international users participate in the NCRIS facilities?

Mr English : We need to take that one on notice as well. Again, there is substantial engagement internationally between the projects and researchers overseas, but I do not have that number now.

Senator KIM CARR: Given the substantial investment that has already been lodged in NCRIS facilities, what is the role of the Commonwealth in ensuring they continue?

Senator Birmingham: We have provided, notwithstanding the fact that a funding cliff was left by your government, funding in the higher education reform package. I invite you to support its passage, and, therefore, funding will be available.

Senator KIM CARR: I understand that a number of NCRIS facilities are now beginning wind-down processes. Is that true?

Mr Griew : There are some that have started talking to us as they are concerned as the end of this financial year, and their funding, certainly draws close.

Senator KIM CARR: How many?

Ms Zizi : Fourteen.

Mr English : Fourteen projects have written to either express their view about the current funding situation or to ask about the current funding situation. I would need to interrogate that material further to answer the question you asked.

Senator KIM CARR: Thank you. Have any facilities already started undertaking redundancy processes?

Mr English : Not to our knowledge.

Senator KIM CARR: Have you any information on the number of NCRIS personnel, people employed in NCRIS facilities, who have left because of the funding uncertainty?

Mr English : No.

Senator KIM CARR: Is it possible to get a copy of the 14 letters that have been sent to the department?

Ms Paul : We would probably need to ask them, but we can do that if you would like us to.

Senator KIM CARR: Yes, could you please take that on notice.

Ms Paul : Sure.

Senator KIM CARR: Is the department intending to provide wind-down funding for any of the NCRIS facilities?

Ms Paul : It depends on the outcome of the legislation, obviously.

Senator KIM CARR: I think we have been through that. I cannot see where the votes are going to come from for the legislation, so is the government now proposing to close down these facilities?

Ms Paul : Clearly the government is still proceeding with the legislation, so, no, we have not undertaken any of those activities.

Senator KIM CARR: Are you aware of any industry or international research partners who have pulled out of NCRIS facilities due to the funding uncertainty?

Mr English : Not to my knowledge.

Senator KIM CARR: How many of the NCRIS facilities or capabilities have data collection and management as their core function?

Mr English : The overwhelming majority.

Senator KIM CARR: What happens to that data collection function if these facilities close?

Mr English : It is a matter for the custodians of the data in those projects. In some cases the data is the agglomeration of material from a range of partners. In some cases there will be an ongoing entity of some description.

Senator KIM CARR: I am not in the habit of quoting the National Commission of Audit, but they did make the observation that the cost of re-establishment would be significantly more than required for the ongoing operation and maintenance of these facilities. Is that correct?

Ms Paul : I do not think we have costed that, because at the moment the government is proceeding with the bill—similar to your wind-down question.

Senator KIM CARR: So you have no contingency plans?

Ms Paul : No.

Senator Birmingham: The government came up with the contingency plan, Senator Carr, because we found that they were unfunded when we came to office and we came up with a plan to fund them. I invite you to help its passage through the Senate. Rather than sit here crying crocodile tears, there is a solution that was in last year's budget that we have been transparent about and that we are still waiting to have—

Senator KIM CARR: No, you have not been transparent about it. You have not been transparent at all. The question of locking this bill in was an afterthought; it was not discussed with people prior to the introduction of the bill. Was it the case that funding arrangements were put in place by the previous government of $185 million, not $150 million, in the 2013-14 budget to fund NCRIS to the end of 2014-15? Is that correct?

Mr Griew : Over two years.

Senator KIM CARR: To what period?

Mr Griew : It is the period until 2015, so it was a two-year—

Senator KIM CARR: Did any strings come with that? Was there any suggestion that this be an offset for anything else?

Mr Griew : It was a time limited budget measure.

Senator KIM CARR: The minister, in his BHERT speech, 13 months from the expiry date of the funding of the previous government, said:

Without this funding we would be unable to continue our work to address the world’s most pressing problems and challenges.

Now, within four months of the end of the financial year, are you able to tell me what certainty NCRIS facilities have about their funding?

Senator Birmingham: We want to give them some certainty. We want to give them some funding beyond that which your government had provided for. We have proposed a means to do so. You are standing in the way of that.

Senator KIM CARR: The Senate has rejected your blackmail, pure and simple. It is a straight blackmail effort and it will not be accepted.

Senator Birmingham: It is not blackmail, Senator Carr. Once again—and we have discussed this a couple of times today—I know your government thought everything could be funded from the money tree. Our government actually believes that, if you are finding money for one thing, you have to find it from somewhere, especially when you are running a significant fiscal deficit already.

Senator KIM CARR: You could find $14 billion for a propaganda campaign at the drop of a hat!

Senator Birmingham: Everything we have done has been funded. We have proposed how we would fund interest into the future, beyond the period of time that your government went to the last election proposing to fund it. We are offering a solution. Right now you command the greatest number of—

CHAIR: Minister!

Senator Birmingham: votes in the Senate and are blocking it.

CHAIR: Minister and Senator Carr! Senator Rhiannon has some further questions, so I would appreciate both of you being able to give her the time to ask them.

Senator RHIANNON: Thank you. Ms Paul, in response to an earlier question when we were talking about fees, you claimed that opening up to private providers would put downward pressure on prices. What is your evidence for that?

Ms Paul : We have said this in each estimates, that you need to look at the reforms as a whole. What I was saying in evidence to Senator Leyonhjelm was that the extension of Commonwealth funding to private higher education providers for the first time takes a financial burden off them which then allows them to be more competitive with universities. Indeed if that has been—

Senator RHIANNON: The question was about putting downward pressure on prices. Is it modelling? Is it experience from other jurisdictions? What is your evidence? That is all the question is.

Ms Paul : I would like to be precise about that, so I will take that on notice. But I note that I think I might have said this this morning—

Senator RHIANNON: Why do you have to take it on notice? You regularly say to estimates—

CHAIR: Senator Rhiannon, you have spoken twice over the Secretary. Ms Paul, can you finish your answer? Then you can follow up, Senator.

Ms Paul : I was talking about broad policy settings. We have spoken here before that it is just a market economics equation that the broadening of a market, with a wider range of pricing possibilities, is likely to put downward pressure on fees that might potentially be set by universities.

What I was going to say was that the head of the Council of Private Higher Education providers has also said that he expects his members to pass on the Commonwealth funding, and that would include price reduction and fee reduction.

Senator RHIANNON: It does sound more like ideology than evidence, and that is not what the question was—

Ms Paul : It is sort of economics, I think.

Senator RHIANNON: The question was about evidence—

Senator Birmingham: Senator Rhiannon is not so big on markets and economics.

Senator RHIANNON: Why I ask the question is because you regularly talk, and you have said it a number of times today, about the issue of downward pressure on prices. So it was fair enough to ask for the evidence.

Ms Paul : Sure.

Mr Griew : I can give you some figures that go to that, if you want. If you take what Mr McComb has said publicly on behalf of COPHE and apply that principle to the reduction from current prices charged by a range of their members by new government funding, then the prices for some of their members would still be higher but some would be at a considerable discount to what the universities would be expected to provide. That is a clear indication of lower price points in that part of the private sector, which goes to your point.

Senator RHIANNON: That is surely just speculation from the industry?

Ms Paul : No, that is the representative of the private providers speaking on their behalf.

Senator RHIANNON: Yes—that is what I mean.

Mr Griew : His account was that he had spoken to his membership, and his membership were of that view. If you took that principle and followed it through it would establish price points for a significant part of the private sector that would be below university price points.

Senator RHIANNON: Isn't it the case that Bruce Chapman has said that income-contingent loans put even more upward pressure on prices?

Ms Paul : I think I addressed that in quite a long answer to Senator Leyonhjelm. We only have a minute, so I will probably cross-refer back to that evidence.

Mr Griew : Professor Chapman has also made submissions to committees—

Ms Paul : The other inquiry.

Mr Griew : inquiring into this, where he goes further on that point.

Senator Birmingham: I think that much of Professor Chapman's findings are at odds with some of those of Mr Phillips too.

Senator KIM CARR: In a statement he made recently at the University of Canberra seminar, Professor Chapman actually indicated that the opportunity for price gouging is substantial.

CHAIR: Any other questions for outcome 3?

Senator RHIANNON: I have, but I will put them on notice.

CHAIR: Thank you. Thank you ballboys and ballgirls! The committee now stands adjourned. Thank you Hansard, thank you secretariat and thank you officers.

Committee adjourned at 23 : 00