A proposal to abolish the indexation on $74bn of student debt has been put on ice after a parliamentary inquiry recommended the bill should be scrapped.
The senate’s higher education legislation committee tabled its report on Monday into the Greens push which also included raising the minimum repayment income to the median wage.
It noted while there was a need to ease cost-of-living pressures, the inquiry’s Labor majority was unconvinced of the proposal’s merit and deferred discussions on higher education affordability to the Universities Accord process.
“While the committee agrees that measures should be taken to ease the cost-of-living burden on Australians, it is unclear whether the measures proposed in the bill will achieve this effectively,” the report said.
Of particular concern was the “uncosted financial implications”, which according to departmental evidence “could be in the order of $2bn, and $9bn for ongoing revenue effects”.
In its own report, Coalition senators called the proposal “shortsighted”.
The looming indexation is set to affect more than 3 million Australians who currently have taken out a HECS loan in order to study.
According to an analysis of ATO data by the Parliamentary Budget Office, more than $74bn is currently outstanding on student loans.
Over the last decade, the average indexation rate was just shy of 2 per cent. But as inflation skyrocketed, the indexation rate has too. Last year, it hit a decade high of 3.9 per cent.
A person with a debt of $40,000 will have their loan increased by around $2800 if the 2023 indexation is as high as 7 per cent, as forecasted.
The final figure won’t be known until the Australian Bureau of Statistics hands down the March quarter inflation results later this month.
It now takes a person on average 9.6 years to repay their loan, according to Treasury estimates included in last year’s budget papers.
The Greens bill, introduced by deputy leader Mehreen Faruqi last year, was backed by the National Union of Students but opposed by industry bodies such as Universities Australia.
In her dissenting report, Senator Faruqi said “by choosing inaction, Labor has chosen to make life harder for millions of people”.
“The committee majority relied selectively on evidence provided by a handful of witnesses to justify what seems like a foregone, ideological conclusion,” she said.
“It is, frankly, a complete failure on the part of the Labor Government to avoid its responsibility amidst urgent calls from the community to take action ahead of indexation on 1 June 2023.”