Cunningham Lecture 2014: The case of the income contingent loan

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Professor Bruce Chapman AM FASSA

Bruce Chapman is an economist employed in the Crawford School of Public Policy at the Australian National University. He has extensive experience in public policy, including: the motivation and design of the Higher Education Contribution Scheme (the first national income contingent loan scheme using the income tax system for collection) in 1989; as a senior economic advisor to Prime Minister Paul Keating, 1994-96; as a higher education financing consultant to the World Bank and the governments of around 20 countries (1992-2014), almost all of which involved higher education financing policy; as a consultant to the Bradley Review of Australian Higher Education on student income support, 2008; and as a consultant to the Australian Government’s Base Funding Review, 2011. He has published around 200 papers on a range of issues, including income contingent loans, long-term unemployment, the meaning of job flows data, the economics of crime, the economics of cricket, fertility, marital separation and government as risk manager. In 2014 he co-edited a book on income contingent loans in theory and practice with Dr Timothy Higgins and Nobel Laureate Professor Joseph Stiglitz. He was elected to the Academy of the Social Sciences of Australia in 1993, received an Order of Australia in 2003 for contributions to economic policy, and was elected President of the Australian Society of Labour Economics (2004-07) and President of the Economics Society of Australia (2007-13).

The Higher Education Contribution Scheme (HECS) was introduced in Australia over 25 years ago, and was the first nationally-based income contingent loan (ICL) scheme collected through the income tax system. It has since been successfully adopted in eight other countries and a bill is currently before the US Congress which, if passed, will introduce ICL to the US.

The benefits of such instruments have been recognised in research involving several disparate potential applications in financing areas well beyond student loans, including for: extensions of paid parental leave, legal aid, business innovation, health care, drought relief, the payment of low level criminal fines  and providing for aged care.

The lecture examines these applications and explain why the use of ICL is a critical new way of understanding the role of government in an insurance context.

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