Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 2 Indexation of higher education support amounts

Summary

Many amounts set out in HESA are indexed on 1 January each year under Part 5-6 of HESA (these are set out in the table in section 198-5).

Currently, the indexation factor for these amounts is the Higher Education Grants Index (HEGI). In the 2008-09 Budget it was announced that the indexation rate for all grants under HESA would be set by reference to 75 per cent of 90 per cent of the Professional, Scientific and Technical Services Labour Price Index and 25 per cent of the Consumer Price Index (CPI), which is known as the HEGI.

The change to HEGI was staged over a period of four years, with all HESA grants being indexed by this rate in the 2012-13 Budget.

From 1 January 2018, Schedule 2 of the Bill will amend HESA to replace HEGI with the CPI.

The CPI will be used each year to index all grants and regulated student contribution amounts for current students under HESA.

Detailed explanation

Higher Education Support Act 2003

Item 1

Subsection 198-10(1) provides that an amount is indexed on 1 January 2012 and on each subsequent 1 January by multiplying it by the indexation factor for the year in question.

This item repeals and substitutes subsection 198-10(1) so that it provides that an amount is indexed on 1 January each year by multiplying it by the indexation factor for the year.

Item 2

Section 198-15 contains a formula which explains how the indexation factor for a year is calculated.

This item repeals and substitutes the formula in section 198-15. The new formula is the index number for the December reference quarter divided by the index number for the December base quarter.

The December base quarter means the quarter ending on the 31st of December two years and a day before the relevant 1 January.

The December reference quarter means the quarter ending on the 31st of December that is a year and a day before the relevant 1 January.

Item 3

Section 198-20 provides the meaning of the index number for the purpose of working out the indexation factor under section 198-15.

Item 3 repeals and substitutes section 198-20 to provide for a new meaning for the index number.

New subsection 198-20(1) provides that the index number for a quarter is the All Groups CPI as published by the Australian Statistician.

New subsection 198-20(2) provides that, subject to subsection 198-20(3), if before or after the commencement of new subsection 198-20(2) the Australian Statistician subsequently publishes a substitute index number for a quarter, that subsequent index number is to be disregarded for the purposes of section 198-20.

New subsection 198-20(3) provides that, if before or after the commencement of new subsection 198-20(3), the Australian Statistician changes the index reference period for the CPI prior to the commencement of subsection 198 20(3), then in order to apply section 198-20 after the change happens, regard is only to be given to the published index numbers for the new reference period.

Item 4

This item repeals the definition of indexation period in the Dictionary at Schedule 1.