Already and this is this is the daily This is the Daily OS. Oh, now it makes sense. Good morning and welcome to the Daily OS. It's Tuesday, the third of June. I'm Lucy Tassel.
I'm Zara Sidler.
If you haven't checked your Ato account recently, I've got news for you. Over the weekend, your hextet went up by three point two percent.
Which is bringing everyone the good news. Good news, Tuesday morning, good good news.
But wait, I hear you ask, didn't the government promise to take twenty percent off my debt after the election. In today's podcast, we'll explain how and why Hex works and how this planned discount is going to take effects. Zara. Over this weekend, I spent a bit of time talking to my friends about our Hex debts.
Yep, so did I. I don't think you're alone there. It was the topic of conversation for many young people.
Yeah.
Yes, and that's because our Hex's debts went up. They went over the weekend, as you said. Plus there's also the question I think that naturally follows on every time we see that increase, which is why are we paying off these loans when generations before us got university for free.
Exactually, someone who got university for free was Prime Minister Anthony Albanisi. And that is because there was once a time from nineteen seventy four to nineteen eighty nine when the government subsidized the cost of unique degrees.
I thought it was longer, if I'm to be honest, I didn't realize it was that short.
It is short. I wonder if it's because there's so many people who benefited from that era who went on to go into public life.
Yeah, there are a lot of.
People in Parliament right now that.
Age it would check out.
Yeah, that makes sense, including of course the Prime Minister. Now, while this was great for students of that era, it has also been argued that this was an unfair burden on taxpayers.
Can you just unpack that? Why is free university unfair for tax payers?
Yeah? Our taxes are one of the main ways the government makes money. It's not the only way, but it's a big contributor. Some people would argue that when the government says it's making something free, it's not really free because one of the ways that the government gets money is via USA so taxpayer exactly. So an example of this is the Medicare levee. It's part of the taxes that you pay. It's calculated at two percent of your
overall income. The argument in favor of this is that everyone who pays taxes pays a tiny fraction of the whole, and then this being allowed to fund something like Medicare, it is argued, ends up benefiting us more than we
end up paying. When the Bob Hawk government came to power in the early eighties, so in the middle of this program, it believed the government could not keep spending as much as it had on places at university because in effect, government spending is in some way you're spending. So by the government subsidizing these free, unique places, they were finding that they didn't want to be spending quite as much of taxpayer money when the government has many
things to pay for. Then in nineteen eighty nine, we have a new system. It's called the Higher Education Contribution Scheme or HEX. The Education minister at the time was a guy named John Dawkins, and here's a little bit of what he said when he was introducing the bills of Parliament that would then kind of make this scheme happen. He said, people who benefit from higher education will be required to make a small contribution towards the cost of
their study. The key features of the contribution scheme are an annual course charge of eighteen hundred dollars per year of equivalent full time study, payment arrangements based on personal capacity to pay, and a choice between lumpsom payment with a fifteen percent discount or payment through the taxation system once a person's income reaches around the level of average earnings in the Australian workforce. He also noted the payments would be indexed to keep pace with inflation.
Okay, so I just want to recap where we are at. So for a period of time, university was free for students who were attending, and that's because the government was subsidizing the cost of that, and that money was raised through tax payers. We were ultimately in one very big circle all paying for that to occur. When Bob Hoork came to power, he said, we're spending too much on this. We are going to implement a new scheme as we
now understand it to be the hex scheme. Yes, and from nineteen eighty nine onwards that scheme has been the dominant way that people take out a loan for higher Education study. Yes, is that right?
That's correct?
Okay, you passed. So then you did say at the end there that the education minister at the time called it a contribution. I believe a small contribution, is what you said. A lot of our listeners who have HEX, maybe they have a double degree, not call it a small contribution. Yes, talk me through that thinking.
Yeah. So, even though in this podcast and in life we all call our student debts HEX, scheme is actually called the Higher Education Loan Program HELP, so you might hear it referred to as HEX help or help.
It was like only upon entering this job that I thought about the fact that it was an AGX. I just always thought there was like a HEX on your home anywake it going, Dan.
It was only when I started this job that I realized it had been called help since I was in year three. But there you go, no matter. The reason for this is because of changes made to the system under the Howard government. Okay, there were many different kinds of changes, but basically more kinds of debts were included in the scheme. Different kinds of schools, different kinds of programs,
and different degrees were able to cost different amounts. Changing from that original eighteen hundred dollars fee.
Okay, So under Howard there were changes to the way system works.
Yes, so it became more of a loan and less of a contribution, reflected in the name of the scheme.
We'll be back with the rest of today's deep dive after a quick message from our sponsor.
But in a lot of other senses, the original plan is still the case all those things I outlined. So your repayments are based on how much you earn, that's still true. You begin paying once you meet a certain threshold. That's still true. And the amount that you owe is indexed, which everyone would remember from a couple of years ago, is still very much true. And that's what happened this past weekend.
That was an excellent segue into the news of the day, which is, of course that our hex set went up due to indexation. Can you just talk our listeners through how indexation is calculated and what it's based on.
Basically, the idea of indexation is that your debt should increase with the value of money to reflect the actual value of money. This time, debts not by three point two percent based on the rate of inflation that's rising prices. This is historically what it's been based on. As I mentioned, John Dorkin said it should be based on the rate of inflation. But as we would remember, our hex stets jumped up by seven point one percent in June twenty twenty three.
Hearing that it's just unbelievable.
Yes, because inflation was so high at the time. And at that time the government passed a new law changing the rules, and that meant that indexation would be based on whichever is the lower of inflation or how much wages have risen by, So that's the wage price index.
So until that time it had always been pegged to the rate of inflation, but because inflation was so high, there had to be an alternative here, Yes, and they.
Went back and applied the new rate of indexation to those to that increase from June twenty twenty three. And now again the government is planning to change the rules in another sense by promising to discount student debts.
I think this is where a bit of confusion, and I'd say rightly so has kicked in for our listeners and for TDA readers, because throughout the election, the big pitch to young voters, especially from labor was we are going to cut your hextet by twenty percent, and now that indexation has kicked in, our debt has gone up. A lot of people are saying, well, I thought it was getting cut. So can you just explain to us when does that actually happen or how does it happen.
Yeah, it's all about timing. The first thing to know is that the discount can't happen until Parliament sits again. But it's not doing that until the end of July. The government has, as we know, a really big majority in the lower House. It will own.
Huge majority, the biggest ever.
In fact, it will only need to negotiate with the Greens or the coalition to pass the bill and the Upper House. Now we don't know for sure, but we know that the Greens policy is that all student debts should be wiped, so I think we could suggest that they would be open to negotiating with the government. I haven't called them up to ask, but I think we will hear from them again ahead of parliament sitting. Then if slash when the bill.
Passes, what you're saying is very likely.
Yes, And the government also, I should note, has said they want to do this as soon as possible.
Yeah, as their first kind of action.
Item if SLASH. When it passes, the reduction will be applied automatically by the ATO. It will apply to the amount of your loan before indexation. If you pay it off in between indexation, so now and the end of the financial year this month, you will get the discount rebated in your tax return, assuming you get a return and not a bill. The indexation applied this weekend will then be recalculated based on the new reduced loan amount. So I think it's time to do a bit of maths.
Please. Unfortunately, let's hold hands and do it together.
So say you have a loan of ten thousand dollars. As of this weekend, your debt went up three point two percent to ten thousand, three hundred and twenty dollars. When the discount comes into effect, it reduces your pre indexation debt to eight thousand dollars, and then the indexation is recalculated and reapplied, so your final result will be eight thousand, two hundred and fifty six dollars.
And can I just jump in here, so no one has to actually do anything, yes, In order to access that cut.
It happens automatical. Okay, all right, and then again, as I said, the government has committed to bringing it forward basically as soon as they walk into the House of Representatives, so we could be seeing it fairly soon.
Yeah, really interesting there, Lucy. Before we go, I do just want to ask is the government planning to change anything else about our hex system, because you said that they've already changed the way that indexation is pegged or what's pegged. Two, are there any other changes coming down the line that we know about.
There's one more thing they want to change, which is raising the threshold of when you need to start paying it back. So right now you need to be earning fifty one thousand, five hundred dollars a year to begin repaying your debt, and the government wants to increase that to sixty seven thousand dollars per year, which is quite a jump. Yeah.
Yeah, well I have to wait and see. The government has a big agenda of election commitments, and as we have said many times before, it's as important to hold the government to account post election as it is during an election period. So we will be keeping track of those commitments and if and when they come to fruition. Thanks for explaining, Lissie, Thanks Sarah, and thank you for
joining us for another episode of The Daily Os. We will of course be back later today with your afternoon headlines, but until then, have a good day.
My name is Lily Madden and I'm a proud Arunda bunge Lung Kalgotin woman from Gadigal Country. The Daily Os acknowledges that this podcast is recorded on the land of the Gadigal people and pays respect to all Aboriginal and Torrestrate island and nations. We pay our respects to the first peoples of these countries, both past and present.