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 by $14billion for university students if it wins the next election has been slammed by top economists.

Mr Albanese said cutting the HECS debts 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 Review that making matters worse, it also divides university graduates by favouring the wealthier ones. 

He said graduates who never earn more than the proposed new $67,000 repayment threshold will get no benefit.  

‘The biggest benefit goes to high earners who would have otherwise paid it off fast. All that, and it does nothing to help with current cost of living.’ 

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

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

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

‘Governments are increasingly shoving spending ‘off budget’ and hiding it, such as student loans, NBN and climate loans,’ Mr Richardson said. 

‘Taxpayers still pay for it.’

The federal Opposition is also vehemently against Mr Albanese’s plan, saying it amounted to a cost of $1,600 for every Australian household.

Sarah Henderson, the Coalition’s education spokeswoman, said it discriminated against the millions of Aussies who did not have student loans.

‘(It) especially favours graduates who have racked up very large debts, many of whom will also be high income earners over their lifetimes,’ she said. 

‘This is also grossly unfair to the millions of Australians who have, in good faith, worked hard to pay off their HELP debt with no discount.’

Education Minister Jason Clare took a very different view, though, saying students now paid more than 40 per cent of the total cost of their degrees, compared to about 30 per cent of the cost in the early 2000s. 

‘For a lot of young people, they’re straight out of uni, they’re on a low income, they’re paying the rent, paying the bills, trying to save for a mortgage, trying to start a family, and they already have to start paying off their HECS bill,’ he said.

‘It’s just a simple fact that a lot of young people are doing it tough, doing it tougher than many other Australians.’

Bruce Chapman, the architect of HECS for the then Labor government under Bob Hawke in 1989, had mixed views about Mr Albanese’s proposal, saying ‘the one-off debt forgiveness is more about politics than economics’.

Mr Albanese said cutting the HECS debts of millions of university students will address the financial inequality experienced by younger Australians. Stock image

Sarah Henderson (pictured), the Coalition’s education spokeswoman, said the Labor’s plan discriminated against the millions of Aussies who did not have student loans

But he added that ‘what the Government has done on repayment arrangements is really, really good and equitable’.

‘The big outstanding problem is 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 ‘fixing this intergenerational unfairness … will take time, but that’s not an excuse to delay’.

He said if Labor wins the election, which is due by next May, his HECS debt plan will be the first piece of legislation it brings in to parliament.

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

‘Instead of promising to wipe some student debt if they get re-elected, Labor should start wiping student debt now,’ she said.

‘Student debt relief shouldn’t be dangled like a carrot on a stick and held hostage to the next election results.’