A rather cynical email arrived in my inbox following the government’s announcement of a new round of university funding cuts.

It read: “The Libs routinely cut funding to education. My sense is that they realise that education did them no good, so why waste money on it.” Very droll.

But seriously, can Education Minister Simon Birmingham, who holds a masters of business administration from the University of Adelaide, not see what’s wrong with the plan?

The details released so far include:

• a cumulative increase in fees that will take them 7.5 per cent higher by 2021
• a 2.5 per cent cut to university funding in each of the next two years
• dropping the HECS-HELP repayment threshold from an income level of $55,000 to just $42,000

So pay more, get less and pay it back when you’re earning just $7000 more than the minimum wage.

Loan or tax?

A HECS-HELP student debt is not a straightforward loan. It is partly an investment by the Commonwealth designed to keep up the domestic supply of engineers, nurses, accountants, lawyers, scientists and so on.

The return on that investment is an economy that doesn’t have to import all of that expertise, and one that generates more wealth than would be possible without the tertiary sector.

It also creates the basic structure to support Australia’s $22 billion education exports sector.

Just under 40 per cent of young Australians attend university, and since the late 1980s this cohort has become skewed slightly toward female enrolments – currently 56 per cent of the total (see chart below).
But it’s what happens to those women when they leave university that really punches a hole in the logic behind these changes.

Besides the life-stage interruptions of childbirth and taking time out the workforce, women are suffering more than men during the current period of chronic under-employment (see chart below).
That manifests as lower incomes, less superannuation savings, a higher probability of poverty in old age … and now, an increase in the personal tax rate for women languishing in a variety of low-income traps.

A levy on the poor

Some better-off Australians like to moan about the Medicare levy, which is payable for singles above $90,000 in income or $180,000 for families.

And many complained when the Abbott government introduced a temporary ‘budget repair levy’ of 2 per cent of income for those earning more than $180,000 in 2014.

But at those thresholds the complaints largely fell on deaf ears – average total earnings nationwide are currently $76,000 for men and $52,000 for women.

Sympathy out in voter-land may be more forthcoming, therefore, for students and recent graduates raising hell over the new loan repayment thresholds.

As noted recently, the old HECS system began life as a fairly benign additional tax on graduates – one this columnist was happy to pay.

But after years of creeping up, it has gone far enough. It’s time to value Australian graduates for the contribution they make to the economy, and stop the fiction of treating a degree as a private good paid for a by a private loan.

Tax graduates, by all means. But wait until they’re earning decent money.