Musing and Memories on the Introduction of HEC's and Where to Next on Income Contingent Loans

The Higher Education Contribution Scheme (HECS) is a rare example of an important, innovative, and imaginative policy instrument developed and applied within a relatively short time period. Looking back over Australian history, innovative policy instruments, with substantial tax revenue or expenditure implications, and introduced quickly, are rare. The short list would probably include the introduction of the old age pension, unemployment benefits and Medicare, although I am not sure of the length of the pre-introduction phrase associated with each of these innovations. Unlike HECS, however, almost all these policy innovations were introduced a long time ago. The size of the macro financial implications, the innovative nature and the speed of introduction and acceptance, suggest that some comments that extend beyond the usual economic discussions of asymmetric information, market failures and adverse selection might be useful.