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Producing Jones's Knowledge Nation will be a costly affair

By Andrew Norton - posted Sunday, 15 July 2001


Latham's idea has policy merit, but it would face enormous political resistance, as governments from both political parties have experienced reforming these areas over the past 20 years.

A third option is to open education to greater private investment. At the moment we have an odd situation. Higher education is one of the few things that an Australian teenager cannot invest his or her money in.

HECS is really a tax rather than an investment, since the money goes to the Government and not to the universities.

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So university students are free to invest in almost anything but the one thing that is most important to their economic future, their human capital.

The Group of Eight, representing Australia's eight research-intensive universities, is listed as having put in a submission to the Knowledge Nation Taskforce. It is a pity it did not adopt the Group of Eight's idea for what is sometimes known as "top-up fees". This would allow universities to charge their students more for their courses, with the money repayable through an income-contingent loan, as with HECS.

The difference is that that the money would go to the university rather than the Government.

The Government plans such loans for postgraduates. It seems highly anomalous to prevent undergraduates from similarly investing in their own degrees.

Private schools should be seen in a similar way. Subsidising these schools lets parents invest more than they could within the government-controlled system.

While some of what parents pay does not increase net investment in education, as it replaces government subsidy with parental subsidy, even this is of value when looked at in the comprehensive context of the Knowledge Nation Taskforce.

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A key to financing grand visions like the one it contains is to get private individuals or groups to finance those expenditures which provide direct returns on investment.

Another key is to focus government spending on genuine public goods, rather than private goods that might have some positive spillover effects for the rest of the community.

The task force makes a good case for investing more in knowledge, but we know that fiscal responsibility as currently practised will deliver too little, too late.

The important debates should be about tax, spending priorities, and letting the private sector finance more.

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This article was first published in The Australian Financial Review on July 3, 2001.



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About the Author

Andrew Norton is a research fellow at the Centre for Independent Studies and Director of the CIS' Liberalising Learning research programme.

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