Wednesday, December 03, 2014

The market for education

A comment on radio this morning got me thinking (2UE breakfast). Committed Liberal voters are angry about the proposed Higher Education reforms (fee deregulation and until yesterday bond rate instead of CPI interest).

These people have already paid expensive private school fees and now face an extra slug. My own observation has been that many parents who pay for private schooling don't pay their children's HECS fees as they do the (correct) calculation it is cheap money.

Interestingly, there would be two differently affected groups. The first are those who have already made most of the commitment on secondary education who would experience a double whammy. They would simply be angry.

The second are those yet to make a commitment on secondary schooling. Making University degrees dearer will make this group reconsider the correct distribution of their expenditure and can be expected to see reduction in demand for private schools. I doubt that the school sector has factored this into their assessments yet.

This provides the opportunity to again mention my recent exercise in measuring the real movement in the sector price indices within the CPI. Education and health are the two fastest rising price indexes.

The education one should be unsurprising given the movements recorded in the SMH's annual news story on private school fees. However, there is also a question of whether there is also a "quality" effect here - that with reduction in other prices people are choosing better "quality" products. (I've put quality in brackets because this is perceived quality - of a product consumers can't accurately assess).

No comments: