Bring back student loan interest, spend the money on toddlers - economist

The AM Show 10/06/2019

A leading economist has called on the Government to future-proof the New Zealand economy by cancelling interest-free student loans and the fees-free scheme.

Bagrie Economics managing director Cameron Bagrie told The AM Show on Monday money spent on easing the financial burden on tertiary students would be better spent on younger kids.

"Let's make a big, bold transformational sort of choice - let's cancel interest-free student loans, let's cancel fees-free in the first year and plough that money into early childhood and primary school education.

"The money is there. It is a political choice we are making not to do it - not a transformational choice."

Cameron Bagrie. Photo credit: The AM Show

The Labour-led Government's fees-free scheme originally had $2.5 billion allocated to it over five years, including an expansion to cover students' second year. In May the Government revealed that was an overestimate, and it was actually going to be a few hundred million dollars cheaper.

Between 1992 and 2006, student loans attracted interest up around 7 percent per annum. Since its inception, students have borrowed more than $26 billion, according to the Ministry of Education, and only paid back about $10 billion. Before the interest was scrapped, it took students on average more than a decade to pay their loans back - it's now eight years.

Writing for the Sunday Star-Times at the weekend, Bagrie said by 2040 we will be able to double the average income if we shake up the education system.

"We're likely to be flying around in drones, we'll be whipping around in driverless cars... the world is a very fast-paced environment. One plus one no longer equals two - one plus one now equals 11. We've got to make this economy a lot more dynamic.

We've got to make it a lot more innovative.

"That's the real big challenge - we're not going to change the DNA of the New Zealand economy overnight. If we want to change that DNA, we've got to start with the kids.

"It's not just about having a trade, being skilled - it's about being innovative, adaptive, creative, flexible. Those are skill-sets we cannot create, impose on people once they hit the tertiary education level."

Those sorts of skills, you've got to start young.

As for the adults who make those decisions - MPs - Bagrie says it's "ridiculous" they only get three years at a time to effect change.

"It drives short-term election-based decision-making... We need some pretty big change in regard to getting some key people in the right places, and we don't have them in those right places."

The AM Show / Newshub reporter Dan Satherley