A HELP debt bubble?

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By David Law­son

Click here for this data in Excel: Debt­watch; CfE­SI

An issue that is often over looked here in Aus­tralia is the ris­ing cost of edu­ca­tion. Uni­ver­si­ty stu­dents are lib­er­at­ed from the up-front cost of edu­ca­tion through the Aus­tralian Gov­ern­ments High­er Edu­ca­tion Loan Pro­gram (HELP). While in oth­er coun­tries like the Unit­ed States the stu­dent loans mar­ket is pri­va­tised, which has con­tributed to their high­ly priced ter­tiary edu­ca­tion sys­tem. Though, after look­ing over the num­bers here in Aus­tralia it seems that the pub­lic cred­it fund­ing through HELP could be hav­ing the same infla­tion­ary effect on edu­ca­tion.

Accord­ing to the lat­est sta­tis­tics of the Aus­tralian Con­sumer Price Index from the ABS,‘Edu­ca­tion’ had the great­est rise out of all the cat­e­gories that record­ed a 352.2 index for March 2012 since the 1989/90 base year of 100. This was fol­lowed by the ‘Alco­hol and tobac­co’ cat­e­go­ry at 315.7 and the ‘Health’ cat­e­go­ry at 283.2. When break­ing this Edu­ca­tion price index increase down into decades the nineties only saw an increase of 66.79% ver­sus the naugh­ties increase of 147.25%. With such a sig­nif­i­cant jump over the naugh­ties decade there must be greater forces at play…

It could be argued that one of the lead­ing fac­tors in dri­ving up edu­ca­tion prices here in Aus­tralia has been the HELP debts. The sta­tis­tics for total HELP debt pub­lished in the ABS Year Book Aus­tralia 2008, Fea­ture Arti­cle 2: High­er Edu­ca­tion Loan Pro­gram from 2001 to 2006 indi­cates that this debt has been grow­ing at an aver­age rate of 12.52% per finan­cial year over the peri­od.

Unfor­tu­nate­ly, I was unable to obtain data beyond this point. Although, assum­ing an aver­age year­ly growth rate of 12.52% I have esti­mat­ed what this debt would look like:

*Esti­mates

More­over, what will hap­pen when wage growth can no longer be sus­tained from a lack of cred­it growth in both the pri­vate and pub­lic sec­tor of the Aus­tralian econ­o­my? Wages will even­tu­al­ly fall, which will increase the real cost of HELP debts. But this has not yet occurred.

Accord­ing to the ABS Labour Price Index, quar­ter­ly wage growth (exclud­ing bonus­es) in the pri­vate and pub­lic sec­tors aver­aged 0.93% from Jan­u­ary 2000 till Decem­ber 2008. Over this same time frame pri­vate and pub­lic cred­it growth was plen­ti­ful­ly increased by 177.83%. The Labour Price Index has real­ly not slowed since the begin­ning of 2009, aver­ag­ing 0.86% quar­ter­ly growth, but the low­est growth point since Sep­tem­ber 1997 was wit­nessed in the Sep­tem­ber 2009 quar­ter, at 0.39%, one year after the glob­al finan­cial cri­sis hit broad news head­lines.

There are obvi­ous­ly many oth­er fac­tors at play in caus­ing the price of edu­ca­tion to rise here in Aus­tralia over the naugh­ties, but access to cred­it through the Aus­tralian Gov­ern­ments High­er Edu­ca­tion Loans Pro­gram should not be over­looked.