The Australian Population Research Institute (APRI) has released a new report, entitled Australia’s higher education overseas student industry: in a precarious state, which argues that Australian universities’ heavy reliance on overseas students is crushing education standards, is oversupplying accounting, IT and engineering occupations, adding to population pressures in Sydney and Melbourne, and is shaping Australia’s foreign policy.
Below are key extracts from this report:
Australia’s overseas student industry has surged in recent years. It generated some $30 billion in export revenue in 2017 from the fees and living expenses paid by all overseas students in Australia ($20.7 billion attributable to the higher-education sector).
This is a remarkable record. Between 2012 and 2016 the number of commencing overseas students in Australian universities increased from 85,497 to 124,150. As a result, the share of commencing overseas students to all commencing students increased from 21.8 per cent in 2012 to 26.7 per cent in 2016…
Despite this success, the industry is in a precarious state.
To understand why, we need to differentiate the industry into its two main markets. They are each vulnerable, though for quite different reasons.
The first comprises universities charging very high fees – $40,000 or more a year by 2018. These are primarily the Group of 8 universities. Despite the princely cost, the number of overseas-student commencements at Go8 universities increased massively, by 56 per cent, between 2012 and 2016. Almost all of this increase came from Chinese students…
The second market covers universities other than those in the Go8, all of whom charge much lower (though still high) fees of around $25,000 per year. Overseas-student commencements in these universities increased by 41 per cent over the years 2012 to 2016. Most of this growth came from countries located in the Indian subcontinent, particularly India itself…
We show that the surge of enrolments in this second market has been largely due to the Australian government’s opening up of these opportunities in 2012 (pages 16-17). A key initiative was to allow all overseas student graduates (including those completing two-year Masters-by-Coursework degrees) to gain access to a work-study visa. This provides a minimum of two years in the Australian labour market after completion of a university degree, regardless of field of study.
No such privileges are available in our chief competitor countries – the US and the UK…
University revenues, especially amongst the Go8, are highly dependent on overseas-student fees. In the case of the University of Sydney, the share of its ongoing revenues from overseas students increased from 16.3 per cent in 2012 to 28.1 per cent in 2016…
A key issue is the Go8’s dependence on the Chinese market. The fear here is that the student flow from China could be arrested or reversed by Chinese government intervention in pursuit of its geopolitical agenda. This is a well-founded fear as our analysis demonstrates. Other concerns include competition for such a lucrative market from other countries, and from universities within China itself.
We focus on another, rarely acknowledged concern. This is the low quality of the education Chinese students are receiving…
Chinese students who do stay on in Australia after graduation and enter the job market find it difficult to obtain employment at the professional or managerial levels. Employers expect their appointees to have complex problem solving, collaboration and communication skills. Many Chinese graduates lack these skills and thus struggle to compete with local graduates and with graduates from English-Speaking-Background (ESB) countries.
Data from the 2016 Census documents this point. Table 4 shows employment outcomes for young China-born males (aged 25-34) in Australia as of 2016, who arrived here between 2006 to 2016 and who held qualifications at degree level or above in Management and Commerce. Only 34.1 per cent were employed as managers or professionals. The outcome was similar for those with Engineering degrees, though a bit better for IT graduates.
Table 4 also indicates that a high proportion (some 31.4 per cent of those with management and commerce qualifications) were unemployed or not in the workforce. This is why we chose to focus on males. The high share of those not in the workforce category is unlikely to be explained by child care responsibilities.
True, it is not just a problem for the Chinese. Most graduates from non-English-speaking background (NESB) countries in business and commerce, engineering, and IT fields struggle to find professional level appointments in these fields. This is because there is a serious oversupply of entry-level candidates, relative to the available job openings.
Employers prefer local graduates.[i] Though not shown in Table 4, the share of Australian-born male graduates in the same age group who held managerial or professional positions was 68.5 per cent, nearly twice as high as for their Chinese counterparts.
The universities’ claims that they are producing highly trained graduates vital for the functioning of the Australian economy lack substance…
The overseas student industry has been put on a pedestal and its continued growth given high government priority.
The reality is that the industry is too big, with too many downsides. At present, the tail is wagging the dog. Such is the importance attached to the industry’s progress that the Australian government is privileging its aspiration for continued expansion. The downsides of this growth have largely been ignored.
Overseas students attending Australian universities don’t just add a pinch of salt to the campus ambience, giving it a vibrant international flavour. Their presence is huge. At the extreme is the University of Sydney where, by 2016, overseas student made up 39 per cent of all commencing students. Most of these came from one country – China.
The University of Sydney was not exceptional. All Go8 universities are moving rapidly towards this scale of overseas student enrolment (Table 2, p. 8). By 2016, 26.7 per cent of all students commencing at Australian universities were overseas students.
With this enrolment growth has come a high degree of financial dependence on fee revenue from overseas students. This dependence is alarming given the precarious state of the industry and the downsides it has generated. Here is a brief summary of the most serious downsides.
Because overseas students concentrate in business and commerce courses, and to a lesser extent in IT and engineering, they often constitute a majority presence in these courses. The result has been that the curriculum, teaching and assessment practices reflect the needs and capacities of these students. As we have argued, the educational standards fall far short of university claims that it is of the highest quality.
Universities prioritise their research output over teaching, in large part because of the need to gain the high ratings to attract overseas students. As a result Australian universities have given little
attention to the need to develop courses which privilege the vocational interests of their students. This is a huge issue given that universities now dominate post-school study opportunities.
Such is the scale of the overseas student industry that it is generating wider social downsides. This was flagged by the Productivity Commission (PC) in its 2016 report on the migrant intake. The PC suggested that the number of student and other temporary visas might have to be limited because of their ‘indirect costs and benefits (externalities)’. The Commission noted that ‘educational institutions have little incentive to consider these effects’.[i]
Since this PC report much more evidence of these ‘externalities’ has emerged.
We have described the impact on immigration policy of pressure from universities to keep accounting, IT and engineering occupations on the list of occupations eligible for points-tested permanent residence skill visas. This is despite the oversupply of entry-level domestic graduates in these fields.
We also documented the remarkable contribution of higher education student visa holders to the level of NOM in NSW and Victoria (which in practice means Sydney and Melbourne – since that is where the great majority of overseas students locate). By 2016-17 this contribution reached 25 to 30 per cent of the additional population attributable to NOM in these two states.
Finally, the health of the overseas student industry is of such importance to the Australian government that it has shaped its foreign policy. The Coalition government’s statement in 2018 that it would not seek to contain China in its geopolitical conflict with the US in the Indo-Pacific appears to have been a direct result of university lobbying.
The overseas student industry should be removed from its pedestal, and its priorities balanced against these downsides.
It is my strong view that Australia’s universities sector has become a giant rent-seeking business, just like the superannuation industry.
Rather than clipping the ticket on the deluge of funds coming in via compulsory superannuation, the universities sector instead clips the ticket on the deluge of foreign students arriving in the hope of transitioning to permanent residency, as well as gaining direct government funding via the demand driven system pertaining to domestic students.
Instead of focusing on providing a high quality education and upskilling Australia’s population, the universities sector has become focussed on pushing through as many students as possible – both domestic and foreign – in order to maximise fees and profit. Again, this has parallels to the superannuation industry, whose focus is on maximising funds under management and fees, rather than achieving strong returns for members.
The end result is the erosion of standards and too many university graduates chasing too few professional jobs.
About the only winners from Australia’s rent-seeking university system are vice-chancellors, whose pay has already exploded to an average of $1 million on the back of the student explosion (both domestic and foreign), at the same time as university students are stuck paying off expensive and increasingly worthless degrees, taxpayers are stuck writing-off unpayable debts, and the broader population is suffering under the never-ending population crush.
It’s time to put a leash on the university sector, starting with removing the link between foreign students studying at university and gaining work visas and permanent residency. Let our universities compete on quality and value alone.