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JobKeeper to turn into HECS-style loans: Reports

Anastasia Santoreneos
·3-min read
Australian dollars with calculator, pen and magnifier
JobKeeper to turn into HECS-style loans: Reports. Source: Getty

The Government is reportedly looking at replacing the JobKeeper scheme with a HECS-style loan scheme, once JobKeeper ends on 28 March.

The program would see pandemic-affected businesses borrow money under a HECS-style loan program, and pay back the loan once turnover returns to a predetermined level, The Australian reported.

Businesses have been calling for a HECS-like loan scheme for weeks, with Small Business Ombudsman Kate Carnell saying they “desperately need ongoing support until their part of the economy can operate again”.

Carnell submitted a proposal to Treasury, asking for ultra-low or zero-interest loans to be provided to companies hit by lockdown restrictions during the COVID-19 pandemic.

The loans would only be repaid once balance sheets are looking healthier.

How does a HECS debt work?

A HECS or HELP debt is a student loan, which gives Aussies the option to enrol into domestic universities without having to pay their tuition fees upfront.

Instead, they can loan the fees from the Government, and pay them back once their salary hits a certain threshold.

There is no interest charged on HECS debts. Instead, indexation is added to the debt on 1 June each year at the rate of inflation.

Would this work for businesses?

Experts say this HECS-style loan could actually be a lot more sustainable than JobKeeper.

“Governments can provide very large sums of money in the form of grants or tax relief, but with enormous future costs to the state of the budget,” ANU professor Bruce Chapman told The Sydney Morning Herald.

“Or governments can extend normal concessional loans now in use, which have all the repayment risks and uncertainties associated with conventional borrowing.

“Instead, the insurance benefits of contingent debt have become very clear from our 30-year experience with HECS.”

The proposal would likely be less risky, because the repayments would be contingent on the revenue the business has.

The scheme is good news for lenders, because they can be sure to get their repayments back, and businesses, because they’ll be given the time they need to build their revenue.

RBA Governor: More stimulus needed

It comes as the Reserve Bank of Australia governor, Philip Lowe, said JobKeeper “saved many people their jobs and helped people in their lives” in a speech to the National Press Gallery on Wednesday.

Lowe said the Government would likely need to have a discussion about whether there is an opportunity for “focused support” in industries which are still feeling difficult conditions.

He predicted some “job shedding” once the subsidy ended, which could coincide with a rise in the unemployment rate before things eventually picked back up in the labour market.

However, he indicated low interest rates were here to stay.

“It is going to be some years before the goals for inflation and unemployment are achieved,” Lowe said.

“So it is premature to be considering withdrawal of the monetary stimulus.”

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