Understanding the implications of the Mid-year Economic and Fiscal Outlook 2014-15

The 2014-15 MYEFO document was released on 15 December 2014 by the Treasurer, the Hon. Joe Hockey MP, and the Minister for Finance, Senator the Hon. Mathias Cormann.

This blog looks at the implications for education, employment, higher education, industry, skills/VET and regulation.

Quotes in italics are taken from the Mid-Year Economic and Fiscal Outlook 2014-15, DECEMBER 2014.

So what’s likely as we move into the 2015 New Year and the 2015-16 financial year?

As an underpinning approach across all portfolios the expectation is,

“Streamlined and better targeted programme delivery. The Government is eliminating wasteful fragmentation in service delivery and removing unnecessary bureaucratic demarcations, which undermine policy effectiveness.”

In line with the industry, innovation and productivity agenda the aim is,

“…investing in a stronger economy by redirecting Government spending to quality investment to boost productivity and workforce participation”

Essentially this means targeted funding and programmes for economic development that creates more jobs.

Education

For education, Science, Technology, Engineering and Mathematics (STEM) has a renewed focus,

The Government will provide $12.0 million over four years from 2014-15 to implement the following initiatives as part of its commitment to restore a focus on science, technology, engineering and mathematics (STEM) subjects in schools:

  • $7.4 million over four years from 2014-15 for the Mathematics by inquiry initiative to develop innovative mathematics curriculum resources for primary and secondary school students;
  • $3.5 million over four years from 2014-15 for the Coding across the curriculum initiative to support the introduction of computer coding in Australian schools;
  • $0.6 million over two years from 2015-16 for the Summer schools for STEM initiative to support female, disadvantaged, and Aboriginal and Torres Strait Islander school students to attend national science and mathematics summer schools; and
  • $0.5 million over two years from 2015-16 as seed funding to pilot an education facility based on the United States’ Pathways in Technology Early College High School (P-TECH). P-TECH aims to align secondary school STEM learning with associate degrees in applied science.

Employment and Entrepreneurship

Driving the policy agenda is the fact that,

“…the unemployment rate is now expected to peak at 6½ per cent.”

There are major increases in cash payments in 2014-15 and over the four years to 2017-18 as a result of parameter and other variations since the 2014-15 Budget including:

“payments for employment services, which are expected to increase by $74 million in 2014-15, largely reflecting higher than expected payments from the Employment Pathway Fund and outcome payments to employment service providers.”

Major reductions in cash payments in 2014-15 and over the four years to 2017-18 as a result of parameter and other variations since the 2014-15 Budget, include:

“payments under the Job Seeker Income Support programme, which are expected to decrease by $131 million in 2014-15 ($517 million over four years), reflecting lower than expected customer numbers and average payment rates”

The Government will implement a new employment services system from 1 July 2015 with total funding of $5.1 billion over four years from 2014-15. 

The new system will better deliver employment outcomes by emphasising payments to providers based on outcomes rather than process.

It will end the problem of training for training’s sake and remove the incentives for providers to churn job seekers through the system.

In terms of opportunities and developments to watch,

“The Government has also invested $1.8 billion in measures since the Budget to further support growth, jobs and new market opportunities, including through the finalisation of the Japan-Australia Economic Partnership Agreement, the reinstatement of Employee Share Scheme arrangements and the establishment of the Global Infrastructure Hub in Sydney.”

Taxation arrangements for employee share schemes will be reformed,

For all companies, discounted options will generally be taxed when they are exercised (converted to shares), rather than when they vest (the employee receives the options). 

In addition, for eligible unlisted start-ups, options or shares that are provided at a small discount will generally not be subject to tax until they are sold. 

The measure will take effect from 1 July 2015 and will have an estimated cost to the Budget of $199.6 million over the forward estimates period. 

What isn’t balanced with the focus on the unemployment rate, is support for new employers and entrepreneurs.

Higher Education

Higher Education Reforms amendments and the establishment of the Structural Adjustment Fund see the next 3 years as critical to shift providers and the whole sector,

The Higher Education Loan Program (HELP) is the largest asset on the balance sheet, in terms of individual programs, and represents the net present value of expected loan repayments and therefore future sources of funds. The HELP asset was $25.1 billion at 30 June 2014 and is projected to grow to $30.6 billion in 2014-15 and $52.0 billion by the end of the forward estimates. This growth is largely a result of improved access to student loans and students paying a greater share of the cost of their education. A slow-down in wages growth as a result of a deterioration of economic conditions may lead to slower loan repayments meaning the government cannot repay its debt as quickly.

Industry

The Australia-India Strategic Research Fund will continue to be funded and the establishment of Industry Growth Centres sees significant investment ($31.4 million) in 2017-18.

Training for Employment Scholarships and Youth Employment Pathways establishment will see an investment of $34.4 million in 2015-16,

The Government will provide $43.8 million over three years from 2014-15 to establish two pilot programmes to assist young people in regional areas and areas of high youth unemployment to transition into employment, education or training. The pilots will start on 1 March 2015 and will be evaluated in 2016 to assess their effectiveness. The Training for Employment Scholarships pilot programme will provide $37.6 million over three years for 7,500 training vouchers for up to 26 weeks of accredited or non-accredited training. The vouchers will be available to eligible employers who employ a young person aged 18 to 24 years for a period of at least 12 months and for at least 25 hours per week. The vouchers will provide up to $7,500 depending on training needs. The Youth Employment Pathways pilot programme will provide $6.2 million over three years for 3,000 vouchers for community service organisations to purchase or provide services to address non-vocational barriers to employment for young people aged 15 to 18 years not participating in school, education or employment. The vouchers will provide up to $2,000 per person depending on training needs and the outcomes achieved.

Regulation

Minimising compliance costs arising from the work of regulators and to shape behavior,

 “… the Government has established a new Regulator Performance Framework. The aim of this Framework is to ensure that regulators minimise the burden that arises as they discharge their responsibilities. Regulators will assess themselves against six key performance indicators each year. The Government has also issued Statements of Expectations to regulators, setting out the importance of administering regulation in a way that reduces compliance costs wherever possible.”

A revised regulatory model for the Australian Skills Quality Authority will see,

The Government will provide $13.6 million over four years from 2014-15 for the Australian Skills Quality Authority (ASQA) to introduce a revised regulatory model which supports a more targeted approach to auditing activities, with a focus on identifying and auditing high risk training providers.

The measure includes capital funding of $5.1 million for ASQA, including to upgrade its information and communication technology system.

The measure also includes a reduction in revenue of $55.1 million over four years as a result of the targeted reduction in the number of registration and compliance audits, which are subject to cost recovery arrangements.

Skills

As we move towards the negotiation of a potential National Partnership Agreement the table below outlines specific purposes payments for skills and workforce development from 2014-15 to 2017-18.

Table 3.25: Payments for specific purposes by sector, 2014-15 to 2017-18

$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2014-15  581 459 371 202 133 40 30 19 1,835
2015-16  585 457 371 203 131 40 30 19 1,836
2016-17  637 498 405 223 142 43 33 21 2,001
2017-18  478 377 305 174 105 31 25 16 1,512

 

From 2014-15 to 2015-16 payments are relatively steady with a significant increase in 2016-17 then a big decrease in 2017-18.  Where providers are heavily reliant on government funding then they will have the next 18 months to diversify.

Written by Wendy Perry, Head Workforce Planner, Workforce BluePrint, December 2014.

 

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