Interview - Doorstop, Parliament House

SUBJECTS: Wages; Education reform; Productivity; HELP debt; Cost of living

JOURNALIST: Do you expect workers will get a 7 per cent increase to the minimum wage today?

JASON CLARE, MINISTER FOR EDUCATION: Today's a big day. Today, 2.7 million Australians get a pay rise. We'll wait until a little later this morning to see what the Fair Work Commission comes down with. But today is a big day.

JOURNALIST: Business claims anything higher than 4 per cent means some businesses will have to lay off staff. Do you think that's actually true?

CLARE: Putting more money in the pockets of people on low incomes means they’ve got more money to spend at the shops, to spend in businesses.

I know that there are a lot of people on the other side of politics who say that we shouldn't be providing extra support to people on low incomes. They say they don't want to see people on low incomes get a pay rise. I have got to say. I do. Because it helps the economy. The reason we've got a challenge with inflation is not because people on the lowest incomes in Australia are being paid too much. It's just not. It's just an outright lie.

JOURNALIST: The Reserve Bank Governor says if we bring up peoples’ pay without increasing productivity, that could have an inflationary effect. What could the Government do?

CLARE: Certainly, there's a big piece of work to do in driving extra productivity in the economy. And over the last ten years, the former government failed miserably on that front. That's why the Employment White Paper that the Treasurer will put out later this year is so important. And I’ve got to say, my portfolio and what I do in early education, in schools, in higher education, is a big part of that. You give people the skills they need to get a job and build a career, you build a more productive economy, you build a stronger economy.

JOURNALIST: Minister on your portfolio, how is it fair that people can go to university, accrue a HECS debt, told that it's going to be interest-free, and despite working full time, making repayments, they actually end up with a bigger debt years down the track?

CLARE: It is interest-free. It is interest-free. That’s important. There's some confusion here in the debate around this, around how a HECS debt works. Just so people get it right. It's not like a loan from a bank. It's not like a mortgage, where the bank lends you money and they charge you interest and they make a profit. It doesn't work like that.

The taxpayer lends you money, lends you a dollar, and they get that dollar back at its real value. It's indexed to inflation. So, the taxpayer doesn't make a profit at all. If there's a change to the way this works, the indexation, then effectively the taxpayer has to pay more.

If you do what the Greens are talking about doing in getting rid of indexation altogether, it would cost the taxpayer $9 billion. What I said in Parliament, I don't want people thinking that university is not worth it. University is worth it big time. Most people here have got a university degree. Going to university costs you money to get a degree, but it's got real value too.

The average income of someone with a university degree is about 100 grand. The average income of somebody whose last year of education is Year 12 is 70 grand. That's a 30 grand difference every single year. And the average HECS debt is $24,000.

Finishing school, and going to TAFE or going to university, is your ticket to the show. My mum and dad never finished school, but they could go off to secretarial college, they could go off and become an apprentice. That world doesn't exist anymore. Almost every single job requires you to finish school and go on to TAFE or go on to university. We need to encourage more people to do that.

And I'll tell you what worries me, we're going to talk about productivity. In the last five years, the percentage of people finishing high school from poor backgrounds is going down. In the last five years, the percentage of people from public schools finishing high school is going down, from something like 83 per cent to 76 per cent. If that doesn't tell you that we've got a serious problem that needs serious reform, then I don't know what does.

JOURNALIST: Couldn't you change the date of the indexation though? Not scrap it, but it comes in on July 1 - June 1, sorry. One of the independents saying could make it November 1. Were you open to changing the date at least?

CLARE: Where I think there might be a good argument for reform is the point that I think Kylea Tink has made around: if you've got a debt of $20,000, I said this on Ben Fordham's program yesterday. I also said it in an interview with Andrew yesterday as well. If you've got a debt of about $20,000, you pay off about $2,000 over the course of the next 11 months. Then the ATO index that based on the original 20 rather than the 18. That strikes me as not right. And that's why I've said to the Accord Team that are reviewing HECS and reviewing the higher education system, and I want them to look at that, see what can be done to fix that.

JOURNALIST: When could that change?

CLARE: Well, the Accord team reports back to me at the end of this month. That's their interim report, where they'll give me their immediate recommendations and suggestions for reform. I should point out I mentioned in the Parliament, I think, on Wednesday…

JOURNALIST: It's too late for this year, though, is the point, right? Like, none of these changes can be done to impact people right now whose debt will go up.

CLARE: No, this is about future reform. So, we get the interim report this month and we get the final report at the end of this year.

JOURNALIST: Does there only to be more support, more education for students who, you say it is interest-free, but most of the people go in to university and do extra courses, do extracurriculars whack it all on HECS instead of paying what they can upfront, under the guise that this isn't going to go up if I don't start paying it right away, if I have a minimum job that doesn't hit the threshold, it's not going to impact me. But with that loan size increasing and tied to indexation now that we've got high inflation as well, it's going to impact them not only paying thousands more down the track, but it's going to hurt them in terms of when they go for loan applications, credit applications as well.

CLARE: When you go to a bank and you ask for a loan for a house, for instance, they take into account what your income is. They also take into account the likelihood of interest rates rising as well. Now, the way HECS works is if there's a change in indexation, like happened yesterday, your annual repayments don't automatically go up. What you pay every year is based on what your income is. You start paying HECS, $48,000 annual salary, it's going up to $51,000. So, there's a threshold where you start paying it, and then it's a percentage of your income that you pay every year depending on what your income is.

The changes that happened yesterday don't mean that people with a HECS debt pay any more today than they did yesterday. What you pay every year, every month, is based on your income, not based on the indexation. Banks will take that into account as well. What they'll also take into account is this: they'll look and say, “hang on, this person's got a university degree. This person has got the potential to earn a lot of money throughout their career.” I just told you the average income is 100 grand of somebody with the university degree. The average income of somebody who just finishes Year 12 is about 70 grand. The average income of somebody who drops out and doesn't finish high school is even less.

JOURNALIST: That $9 billion figure - is that per year, is that over the forwards, is that total, how's that $9 billion figure reached slash broken down?

CLARE: Yeah. It's either in the forwards or over the medium term. I can get those details to you.

ENDS