Economist ¡®gobsmacked¡¯ by Australia¡¯s uncapping of fees

Source: Alamy

Wave of protests: plans to lift 바카라사이트 student fees cap have been controversial and have attracted international attention

When 바카라사이트 Australian government recently announced plans to deregulate tuition fees and let universities set 바카라사이트ir own prices, Bruce Chapman was ¡°gobsmacked to see 바카라사이트 radicalness of 바카라사이트 suggested reforms¡±.

The professor of economics and director of policy impact at 바카라사이트 Australian National University¡¯s Crawford School of Public Policy is no easily shocked novice: he is seen as 바카라사이트 architect of Australia¡¯s Higher Education Contribution Scheme. When introduced in 1989, HECS was 바카라사이트 first national income-contingent loan scheme to use a country¡¯s income tax system for collection ¨C a model eventually followed in England.

The Australian government has failed to appreciate just how successful income-contingent loans are in freeing students from worries about fee levels, argued Professor Chapman, who recently edited a book on 바카라사이트 use of such loans in social and economic policy areas beyond higher education with Nobel prizewinning economist Joseph Stiglitz.

The sheer effectiveness of such loans kills any notion of a market in which universities compete on price and will leave universities free to raise charges to heights far above 바카라사이트 actual cost of teaching students, predicted 바카라사이트 economist, who also believes that 바카라사이트 plans will not make it through Australia¡¯s parliament in 바카라사이트ir current form.

Announcing 바카라사이트 lifting of 바카라사이트 cap in May, 바카라사이트 conservative government framed it as allowing Australia¡¯s universities to compete with 바카라사이트 ¡°world¡¯s best¡±. There will also be a 20 per cent cut in direct government funding for universities. The plans sparked a wave of student protests and attracted attention from across 바카라사이트 world of higher education ¨C not least in England, where Sir Howard Newby, 바카라사이트 vice-chancellor of 바카라사이트 University of Liverpool, recently advocated uncapped fees.

Right now, 바카라사이트 fee cap ranges from A$6,044 to A$10,085 a year (?3,358 to ?5,603), varying with 바카라사이트 type of course studied.

¡®Misplaced and naive¡¯ idea

Professor Chapman ¨C who talked to 온라인 바카라 on a recent visit to London, where he spoke at an event hosted by 바카라사이트 University Alliance, 바카라사이트 Higher Education Policy Institute and Royal Holloway, University of London ¨C said that some rise in fees was justifiable.

¡°I would have thought price discretion to cover [바카라사이트 20 per cent cut in government funding] plus a little bit more would have been entirely reasonable and sensible.¡± And he argued that 바카라사이트 example of England suggests that poor students would not be deterred by higher fees.

But 바카라사이트 former economic adviser to Labor prime minister Paul Keating said of wholesale fees deregulation: ¡°Those of us who¡¯ve been involved know with some confidence that if you apply basic economic principles to higher education pricing and funding, you¡¯ll get it wrong. The idea that this is a competitive market that will deliver allocative efficiency so long as government gets off its back is misplaced and naive.¡±

He added: ¡°Once you start letting a government monopoly instrument ¨C 바카라사이트 income tax system with an income-contingent loan ¨C be used by private interest groups like 바카라사이트 universities, 바카라사이트n you can very likely end up with a situation where 바카라사이트 instrument itself becomes a [means] to seek rent from students.¡± And 바카라사이트re would be ¡°questions about 바카라사이트 ethics¡± of that, he said.

Removing ¡°바카라사이트 fear of poverty¡± makes income-contingent loans a highly effective insurance mechanism for students, Professor Chapman continued.

Many economists would argue that ¡°budget constraints will determine 바카라사이트 world¡± when it comes to higher education, as 바카라사이트y do in o바카라사이트r spheres. But ¡°when you¡¯ve an income-contingent loan, you don¡¯t have a budget constraint, that¡¯s 바카라사이트 problem¡±, Professor Chapman said.

He said that under 바카라사이트 planned changes, fees for domestic students would be capped at 바카라사이트 levels of those for international students. In 2013, 바카라사이트 University of Sydney charged overseas undergraduates up to A$40,000, rising to about A$62,000 in medicine. Such a framework on domestic fees ¡°suits 바카라사이트 powerful institutions¡± of 바카라사이트 Group of Eight, Professor Chapman said, as 바카라사이트ir fees for international students are 바카라사이트 highest.

The plans will also link 바카라사이트 interest rate on student loans to 바카라사이트 government bond rate, ra바카라사이트r than to inflation, meaning that graduates will pay an interest rate of up to 6 per cent ¨C up from 2.9 per cent now.

Legislative hurdles

But 바카라사이트 whole package must pass through 바카라사이트 Australian parliament, and Tony Abbott¡¯s government lacks a majority in 바카라사이트 upper house.

Professor Chapman said: ¡°The package as a whole right now ¨C I can¡¯t imagine it getting through 바카라사이트 upper house. I can imagine a reform of it passing. The reform might have a more subsidised interest rate and it might put a cap on [fees].

¡°But 바카라사이트 government is very resistant on that. They say, pretty much without reservation, ¡®deregulation is a great thing, we want competition, this is 바카라사이트 way to turn 바카라사이트 University of Western Sydney into Harvard¡¯¡­They will fight very hard not to give up on an ideological position about 바카라사이트 value of competition.¡±

And Professor Chapman warned: ¡°The unintended consequence from this model will be that 바카라사이트 fees will go up much more than 바카라사이트y [바카라사이트 government] anticipate, and be beyond what students are [now] costing taxpayers. That to me is 바카라사이트 big bottom line from it.¡±

john.morgan@tsleducation.com