My column in today’s AFR (subscription required) is about financing renewed investment in universities. Here’s an extract.
What is needed is a large-scale capital injection. In a budgetary environment still dominated by cash accounting, this is unlikely to be provided out of general revenue. However, there is one big asset associated with the university sector that could be used to finance new investment. The student debt accumulated under HECS amounts to between $5 billion and $10 billion, depending on how it is valued.
This debt is treated as an asset of the commonwealth but it ought to be regarded as a contribution to the university system from graduates. Bonds secured against the HECS debt and serviced by the associated flow of HECS repayments could be used to finance new investment in higher education, repairing the shortfalls of the past decade. To ensure equitable access to funds, universities could be aggregated into funding groups, each representing a mix of university types (old-established sandstones, former institutes of technology, former CAEs, regional universities and so on) with different endowments of assets.
Although borrowing against the HECS debt would provide a flow of investment funds in the medium term, it would not change the fact that, ultimately, public expenditure must be financed by taxation. HECS repayments used to service higher education bonds would not be paid into general revenue as at present.
More than any other activity undertaken by society, education embodies the obligations of each generation to the next. Explicit recognition of student contributions as a basis for future investment in education, rather than a mere user charge for consumption of current services, would contribute to social cohesion as well as yielding a social return as high or higher than any alternative investment available to governments or individuals.
Update Andrew Norton disputes my claim about social cohesion. I don’t see a need to change what I’ve written in response.
John Quiggin 
By my reading, you’re arguing for a return to the original rationale for HECS — not “user pays”, but “user invests”. How, though, do you enshrine that principle without precipitating a decline in genuine government funding? After all, predictions that HECS (or even HEAC) would be the thin end of the wedge have essentially been proven correct.
as slamming sam would say: you know it makes sense. Q: how could the policy change be effected? more or less covers the Q asked by “robert”. the actual revenue to gov’t in any budget period is probably a good deal less than the total accummulated debt so the necessary adjustments to the budget bottomline may be manageable (?actual figures). greater problem is changing the mindset. ultimately, taking on the whole of the economic-rationalist ideology. the rationalist value-set seems to exlude anything that can’t be pinned down to dollars and cents in a measurable way within a defined period – a very short period. Investment in the next generation (and beyond) – ah – too open-ended. besides, seems to be the ghost of a libertarian value-set behind the rationalist position (ala “Atlas Shrugged”)the logic of which is that it is stupid to fund the essentially untalented masses when the genuinely gifted will rise to the top anyway. Re previous comment (sorry – don’t have time to backtrack and check name) about ‘preaching to the converted’ – yeah, well, we all of us need a church, a sangra – a fellowship. perhaps it’s ‘not enough’ – but so little is these days.
as slamming sam would say: you know it makes sense. Q: how could the policy change be effected? more or less covers the Q asked by “robert”. the actual revenue to gov’t in any budget period is probably a good deal less than the total accummulated debt so the necessary adjustments to the budget bottomline may be manageable (?actual figures). greater problem is changing the mindset. ultimately, taking on the whole of the economic-rationalist ideology. the rationalist value-set seems to exlude anything that can’t be pinned down to dollars and cents in a measurable way within a defined period – a very short period. Investment in the next generation (and beyond) – ah – too open-ended. besides, seems to be the ghost of a libertarian value-set behind the rationalist position (ala “Atlas Shrugged”)the logic of which is that it is stupid to fund the essentially untalented masses when the genuinely gifted will rise to the top anyway. Re previous comment (sorry – don’t have time to backtrack and check name) about ‘preaching to the converted’ – yeah, well, we all of us need a church, a sangra – a fellowship. perhaps it’s ‘not enough’ – but so little is these days.