April 21, 2016

Three problems with the Supplementary Report on HELP from the Parliamentary Budget Office

On 6 April 2016, The Parliamentary Budget Office (PBO) released Report no. 02/2016 Higher Education Loan Programme: Impact on the Budget offering models and costings for the HECS/HELP program into the future, taking into consideration Labor’s demand driven policy and Liberal’s potential deregulation one – amongst others.
IRU Executive Director, Conor King asked four big questions of the PBO 13 April 2016.
The PBO issued a supplement to the report on 20 April 2016.
Conor King has three main problems with it.

• First, the Parliamentary Budget Office’s (PBO) estimate is highly dependent on the interest rate for Government borrowing. Its chart shows that when the interest rate was low the cost reduced twice.  Change its assumption about future interest rates for Government borrowing and the estimated costs will grow or shrink accordingly.
• Second, the PBO estimates the cost to Government differently depending on whether the Government directly pays a university or advances money for a student.  The PBO assumes Government borrows to advance money for students; but uses revenue to pay universities directly.  The consequence is that on its assumptions given time it would be cheaper for Government to eliminate student payments in favour of direct Government subsidy.
• Third, the Supplementary Report still leaves opaque the long term cost of HECS-HELP, the current funding system for undergraduate education. This prevents use of the Report to consider the consequence of the current system against the various alternatives.