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Two steps forward, one step back: price flexibility with rigid quotas

By Andrew Norton - posted Wednesday, 25 June 2003


The PELS scheme will be abolished, and all Australian full-fee students will be able to borrow up to $50,000 through FEES-HELP. At least for courses with total fees below $50,000, this should mean that more students are able to enrol in their first preference course. Students or graduates with FEESHELP debts will have their debts indexed to inflation, and will be charged 3.5 per cent interest for ten years.

The income threshold at which both HECS-HELP and FEES-HELP debtors must start repaying 3 per cent of their income will be lifted to $30,000. However, new levies of 6.5 per cent to 8 per cent of income will be imposed on students or graduates earning over $52,658.

Conclusion

Though Our Universities: Backing Australia's Future lessens the Commonwealth's control over prices, on a socialism-market spectrum it is still closer to the socialist end. The Commonwealth is not content to be a facilitator, helping with subsidies, loans and information but letting universities and students make the key decisions about what to study, where to study, and how much to spend. Through its rigid quotas, its price and loan caps, and a raft of micromanagement programmes it still wants to control all or influence all these things.

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Dr Nelson has said in jest that the Secretary of his Department is a Commissar running a Politburo. This is one joke about the university system he'll be able to use for a long time yet.

Yet for all the flaws of what we are now offered in the Nelson package, it is better than the available alternatives, the status quo or the ALP. The status quo offers too little money and incentives heavily biased against teaching, while the Nelson package goes some way toward correcting both. The ALP plans to outline a policy in the coming weeks. The signs, however, are not encouraging.

Labor offered higher education small sums in the 1998 and 2001 elections. They continually attack university fees. Without that private money, and with serious constraints on public money, it is hard to see how they could match what the Coalition has on offer. Even if they come up with more public money than the government, without using market mechanisms they are not going to be able to target it effectively, or to change universities' incentive structures. At this stage, the status quo and the ALP are just variations on each other, and no solution at all. With a few modifications the Nelson package will begin the long overdue structural reform of Australian higher education.

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This is an edited extract from an Issues Brief published by the Centre for Independent Studies. Click here to download the full text (pdf, 132kb)



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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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