Turnbull declares war on Aussie kids


By Leith van Onselen

Malcolm Turnbull has launched a full scale war against Australia’s youth.

Whilst Turnbull refuses to address negative gearing and the capital gains tax (CGT) discount, which together cost the Budget many billions in foregone revenue, the Coalition is now planning to slash funding to universities by 20%, thus leading to significantly increased fees for Australian students. From The Australian:

Students should expect to be hit with significantly higher uni­versity fees under the federal ­government’s higher education platform heading into the ­election…

It is likely a 20 per cent funding cut, first proposed in the first Abbott government budget, will remain, with the shortfall to be covered by a shift to higher student contributions…

Senator Birmingham told a Universities Australia conference dinner on Wednesday that higher education reform was “necessary to support federal budget sustainability”…

Currently, the government pays an average of 60 per cent of tuition fees, while students pay the balance via income contingent loans, known as FEE HELP.

An inversion of the current 60-40 split would cover university budgets for a 20 per cent funding cut, said Andrew Norton, a higher education policy expert with the Grattan Institute.

“Given the government’s fin­ancial situation, universities are going to have to contribute to reducing spending. It looks very much like the 20 per cent cut is ­officially back on the agenda,” Mr Norton said.

As I noted last year when the Abbott Government first proposed this reform, there are several reasons why voters should push-back.


First, Australian students already pay a higher proportion of their tuition than those in most OECD countries, and fee deregulation would likely result in significant increases in student debt levels, acting as a millstone on their futures.

Second, the impact on women and certain socially beneficial professions would also be particularly bad, as NATSEM’s Ben Phillips demonstrated when modelling the likely HECS debts of female scientists, nurses and teachers based on typical career trajectories.

Third, the higher fees associated with deregulation could actually worsen the Budget, since under HECS, the Government forwards all the money upfront to the University, and given defaults would likely rise.


Fourth, there is no guarantee that the increased fees would be used by universities to improve the quality of teaching/courses. Rather, it is just as likely that they would be used to pad universities’ administration departments, to beef-up research, to pay for lecturers’ junkets, or any number of other follies.

Finally, there is the productivity cost. Malcolm Turnbull has gone to great lengths (and taxpayer expense) to spruik his so-called “innovation agenda”. But surely having a highly educated young workforce free from crippling student debts is a prerequisite for achieving such an outcome?

Thankfully, the Labor Party has proposed more sensible policy.


By addressing the negative gearing and CGT rorts, and in the process raising some $32.1 billion over 10 years according to the Parliamentary Budget Office, Labor can actually afford to raise university funding, which it has pledged to do:

Labor says its higher education plans will cost $13.8 billion over 10 years, while the Coalition’s policies will cut the spend by $12 billion over the same period…

The federal opposition announced last year that it would take a policy to the federal election which promised to guarantee funding which it claimed would deliver $2500 more per undergraduate place than the Coalition. By 2018, a university will receive $11,800 a year per student, rather than $9300 under the current trajectory. The funding will be indexed to inflation, meaning it will rise to $12,100 the next year. It claimed this would cost the budget a net $2.5 billion over the first four years…

The government is locked into a plan the Parliamentary Budget Office says will cut $12 billion over 10 years, Senator [Kim] Carr said.

“Labor’s plan puts $13.8 billion back into the system over the same time period”, he said.

The barriers facing Australia’s youth are already becoming increasingly prohibitive, and the Turnbull Government’s university funding cuts would only add to the pain. Not only will most students graduate with higher debts under the Coalition’s plan, but they are also likely to face poor job prospects following the hollowing-out of the economy, as well as increasing automation. This policy also makes a complete mockery of Turnbull’s “innovation agenda” which is all about highly educated Australians driving productive, disruptive ideas and investments.

Add to this Australia’s sky high housing costs, which Turnbull has endorsed, and a tax system that will increasingly punish income earners while largely ignoring wealth, and the future facing many younger Australians is looking increasingly downbeat.


Malcolm Turnbull has effectively launched a full-scale war against Australia’s youth.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.