Economist unleashes on Anthony Albanese HECS plan: ‘Subsidy for tertiary educated, paid by those who aren’t’

Anthony Albanese’s plan to cut HECS debt for university students by $14 billion if he wins the next election has been rejected by top economists.

Mr Albanese said reducing the HECS debt of millions of university students will address the financial inequality experienced by younger Australians.

But former Reserve Bank of Australia economist Ashley Craig said the plan would be a “subsidy for those who are tertiary educated, paid for by those who are not.”

Mr Craig, who is now a researcher at the Australian National University, told the Financial overview And what makes matters worse is that it also divides college graduates by favoring the wealthier ones.

He said graduates who never earn more than the proposed new repayment threshold of $67,000 will not receive any benefits.

‘The biggest benefit goes to high earners, who would otherwise have paid it off quickly. All that, and it adds nothing to the current cost of living.”

The Prime Minister said in a speech in Adelaide on Sunday that the Labor government’s plan was “about putting money back in your pocket and putting intergenerational equality back into the system”.

He added that it would be “good for the cost of living, good for this generation and good for generations to come.”

But Chris Richardson, one of Australia’s most respected economists, said taxpayers will pay the higher debt costs if Labor wins the next election.

“Governments are increasingly ‘off-budget’ and hiding expenditure, such as student loans, NBN and climate loans,” Richardson said. “Taxpayers are still paying for it.”

The Federal Opposition is also strongly against Mr Albanese’s plan, saying it would cost $1,600 for every Australian household.

Coalition education spokeswoman Sarah Henderson said the Coalition was discriminating against the millions of Aussies who did not have student loans.

“(It) particularly benefits graduates who have accumulated very large debts, many of whom will also have high incomes over their lifetimes,” she said.

“This is also grossly unfair to the millions of Australians who have worked hard in good faith to pay off their HELP debt without a discount.”

However, Education Minister Jason Clare took a very different view, saying students now pay more than 40 percent of the total cost of their studies, compared to around 30 percent of the cost in the early 2000s.

‘A lot of young people are coming straight from university, on a low income, paying the rent, paying the bills, trying to save for a mortgage, trying to start a family, and they’ve already had to start paying off their HECS bill, he said.

“It’s just a simple fact that many young people are doing it tough, and are doing it harder than many other Australians.”

Bruce Chapman, the architect of HECS for the then Labor government under Bob Hawke in 1989, had mixed views on Mr Albanese’s proposal, saying: “The one-off debt cancellation has more to do with politics than economics.”

But he added that “what the government has done in terms of the repayment arrangements is really very good and fair.”

“The big outstanding issue is that when the previous (Coalition) government changed the cost of degrees in 2020, they got all the prices wrong, which was the worst higher education policy in Australia ever,” Mr Chapman said.

Mr Albanese said that “resolving this intergenerational unfairness… will take time, but that is no excuse to delay.”

He said if Labor wins the election, due in May next year, its HECS debt plan will be the first piece of legislation it will introduce in Parliament.

Mehreen Faruqi, Greens higher education spokeswoman, said the debt reduction was an important step forward but needed to be done sooner.

“Rather than promising to wipe out some student debt if re-elected, Labor should start paying off student debt now,” she said.

“Student debt relief should not be left dangling like a carrot on a stick and held hostage to the next election outcome.”