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Chapter 1: What is the main topic discussed in this episode?
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Ready? And good morning!
This is the Daily Oz.
This is the Daily Oz. This is the Daily Oz. Oh, now it makes sense.
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Good morning and welcome to The Daily Oz. It's Tuesday the 2nd of June. I'm Emma Gillespie. I'm Billie Fitzsimons. The HECS debt of around 3 million Australians went up by 2.8% this week and it's a system that's undergone plenty of change in recent years. Despite that, one question remains the same. Why do debts go up on the 1st of June?
And is the system doing what it's supposed to do? On the 1st of June, their total HECS debt will increase by over a billion dollars. Compulsive repayments that they have made in the last 12 months will not be counted towards their debt before their HEX debts go up yet again.
Today, we are going to explain the changes the government has already made, what just happened to your HEX debt and why the timing of this annual increase is still being debated. But first, we're going to hear a quick word from Abigail in the TDA team.
Hi there, I'm Abigail, or Av for short. I'm TDA's video producer, which means I do a lot of the jazzy video edits that you see on Instagram and TikTok. But from time to time, I'll be on camera reporting on the latest stories in science, thanks to my background in medical science. TDA is always trying to grow and grow, so I just have one tiny request.
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Chapter 2: Why did HECS debts increase this June?
just go to our podcast show page and the button will be there at the top. And if you're watching on YouTube, press subscribe. And thank you for being a part of the TDA community.
Em, I want to go back to the basics and I want to start with a question that even though we have reported on HEX so many times throughout the years at The Daily Oz, still trips me up. Is it HELPLONES or is it HEX? And what is the difference? It's actually HEX HELPLONES.
That's the official title. For some reason, I'm just never going to get on board with calling it that. I think it's like inflation. Like inflation is the cash price index, the CPI, but we never call it CPI. We call it inflation. So hex debt is a kind of commonplace or colloquial term for hex help loan, but I'll keep calling it hex debt for the purposes of this podcast. That's true.
But what we're talking about is a higher education contribution scheme loan. That's what HECS stands for. Under the government's higher education loan program, that is what HELP stands for. Now, uni students in Australia have the option basically to either pay upfront for their studies or apply for a HECS loan under the HELP scheme. A little bit of a history lesson.
In 1974 to 1989, degrees were free. That was great for the students at the time, including our Prime Minister, Anthony Albanese. Many of our parents. Many of our parents. But it was argued that that created an unfair burden on taxpayers. So from 1989, the Hawke government rolled out HECS.
And that basically means that students borrow money from the government to pay for their studies and their individual repayments depend on their income. So the current threshold there is $67,000. That means if you earn above 67K annually, that triggers you to be required to start paying off your debt. Next year, that increases to $69,000 annually in line with inflation.
But basically in 1989, at the time that this scheme was rolled out, the education minister of the day, John Dawkins, said people who benefit from participation in higher education will be required to make a small contribution towards the cost of their study, noting payments would be indexed to keep pace with inflation. So all of that is to say that your HECS help loan is your HECS debt.
It can include unis. It can also include some approved TAFE and private colleges and institutes.
And that word that you just said, index, is the key word today because that is what just came into effect on Monday.
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Chapter 3: What changes have been made to the HECS system recently?
The loans were indexed. I remember learning about this for the first time and being confused about the difference between indexation and inflation and then learning that it was kind of similar and then it all changed. Take us through what indexation is.
So indexation, as it applies to your HECS, is relevant on the 1st of June every year when your debt is adjusted significantly. upward. So your debt gets bigger essentially. Now, the reason that the indexation figure fluctuates is that money changes in value over time. So, you know, a dollar today is worth less than a dollar 10 years ago. So the government adjusts your debt to keep pace with that.
And this year, the indexation figure is 2.8%.
Which is much lower than it was in, I think it was in 2023 when it was above 7% from memory. Yep. And that was the highest it had been in decades, maybe ever. I just remember it being such a huge number. And that is kind of when we all became really familiar with indexation because it meant that hex debts all over the country were going up by thousands of dollars.
Yeah, it was massive. And you're absolutely right. It was the biggest single increase since 1990. This was in 2023 when hex debts increased by 7.1% due to a period of really high inflation at the time. And that sparked plenty of debate. I think we all became crash course overnight experts in indexation because we were like, what's going on with our hex debts?
Now, that ended up triggering the government to pass legislation to address that challenge of high inflation. And it ended up tying indexation to either the rate at which wages increase, wage growth, or at which prices increase, inflation, whichever is the lowest of those two. So the idea now is that your debt can't grow faster than wages are growing.
So after the government changed those rules, we then saw indexation lift to 3.2%. 2% last year. Now it is 2.8%. That's the lowest indexation since 2021. And it means that yesterday on the 1st of June, a $30,000 HECS debt would now sit at around $30,840. So that was a change that was actually recommended by the 2024 final report from the Australian Universities Accord.
It handed down several recommendations and one of those was to overhaul indexation to be fairer for students.
Em, I think a lot of people listening to this will remember that last year the government announced that it was going to cut HEX debts, I think by 20% from memory, and that that would apply to all HEX debts. And that was happening outside of indexation or anything else. They were just cutting 20% of HEX debts.
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Chapter 4: What is indexation and how does it affect HECS debts?
Incredible. So much talent. And a 21-year-old Sydney musician by the name of Sterling Nasser put his hand up and said, you know what? I actually can sight read and I can fill in for this piano player despite never having seen the music before. This is incredible. And he sat in with the orchestra and freaking nailed it. This is so, so good.
This is my favourite story ever because I just think to have that conversation with yourself before you put your hand up, right, he would have had so much inner dialogue of like, can I do it? Is this crazy? I don't know. But if I don't do it, it's going to ruin the show. Yeah.
Yeah, and he said that he had one of his friends by his side who was saying, you have to put your hand up.
Oh, I love this.
And so he did. Now, side note, Belle, who you are familiar with, she is a journalist in the TDA office. Yep. When she pitched this to us, she said, it's my friend. I know him. No! Yes. So he reached out and he sent us some quotes. He said that he thought... I know, it's so good. He said that he thought it would...
just be a great experience and the chance to play with world-class musicians and a two-time Oscar winning conductor. That is the composer, Justin Hurwitz. He also told Bell, I've never imagined something like that would happen to me, but I'm just really glad I could contribute in a small capacity to what was an amazing show and an amazing night.
Oh my God, I'm covered with goosebumps. I know. My whole body.
Wow. And I'm just sitting here dreaming of the moment that Taylor Swift is in concert and says, guys, I'm too sick. And I put my hand up and say, Taylor.
And Billie says, the show must go on. It's me, Billie Fitzsimons, aspiring singer. Who is completely tone deaf, but will put on a show. Tone deaf is a harsh critique of yourself. But accurate, as you know. You are a passionate and enthusiastic singer and it's a true joy to hear you sing along to any Taylor Swift track.
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