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Australian loan strife or Wot no RAB?

April 7, 2016

“Higher education loan fiasco sets $185bn time bomb”

That’s the headline at the Australian.

It continues to outline concerns that have lead to discussion about recovering debts from dead graduates and their families.

The nation faces a $185 billion funding time bomb from soaring student debts at universities and technical colleges, in a shock analysis that will force a new approach­ to education policy to avert an “unsustainable” blow to the federal budget.

The Turnbull government ­admitted the risk from “ballooning” costs in higher education as polit­icians blamed each other for policies that will deepen the deficit while lumbering young Australians with bigger personal loans.

The stark warning from federal parliament’s independent budget office reveals the true cost of grand promises from Labor and the Coa­lition in recent years, when they opened the doors to hundreds of thousands of additiona­l students while also encouraging­ a big rise in fees.

The hit to the budget bottom line will swell from $1.7bn this year to $11.1bn a year a decade from now, a spending burden that dwarfs the extra money promised for the Gonski school reforms over the same period.

What a relief that we, here, have a more robust (relatively speaking) accounting and budgeting mechanism here that requires governments to update estimates of likely loan repayments.

See if you can guess who advised on abandoning that approach?

The only country that has a system like ours is Australia. The last time I was in Australia, comparing notes and discussing our two systems, when I asked the leading Australian expert what the Australian equivalent of the RAB charge was, he said, “I think when we launched the scheme five years ago, we did an estimate of write-offs, and come to think of it, we probably ought to have another look at it now.” The idea that every six months a new figure was churned out essentially based on what has happened to earnings in the previous six months compared with the OBR forecast in 2011 would have been regarded as absurd.

 

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