Australian unis dangerously reliant on Chinese students

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By Leith van Onselen

Australia’s universities have been warned to take action to mitigate the risk of a decline in Chinese students by the higher education program director at the Grattan Institute, Andrew Norton. This warning comes after the University of Illinois, where 20% of student students are Chinese, has paid nearly $US500,000 to insure against a “significant drop” in fees from Chinese students. From The AFR:

“Universities raise all the money they can and they spend all the money they raise. They still end up feeling poor and asking for more…

“In Australia, the fact that the level of surplus has actually been shrinking isn’t consistent with putting money away for a rainy day.”

However, as usual, the rent-seeking Universities Australia has downplayed the issue, defending its extreme reliance on Chinese students:

“The best insurance to continue Australia’s strong success in attracting international students is to maintain the quality of our university system,” said CEO Catriona Jackson.

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The Australian Population Research Institute’s (APRI) latest report documented the extreme reliance on foreign (mostly Chinese) students and argued that it is crushing education standards, is oversupplying accounting, IT and engineering occupations, is contributing to population pressures in Sydney and Melbourne, and is shaping Australia’s foreign policy:

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…

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…

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’.

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.

In a similar vein, a recent report by The ABC also revealed that Australian university standards have been ‘dumbed down’ by foreign students, many of whom have very poor English and leave university practically unemployable:

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…an ABC investigation has uncovered an abundance of international students who describe struggling to communicate effectively in English, participate in class, or complete assignments adequately.

Academics as well as employment and education experts told the ABC that English language standards are often too low or can be sidestepped via loopholes, and that students are often put in stressful classroom situations that can lead to cheating.

Many of the students also often find themselves completing degrees which cost in excess of $100,000 that rarely lead to professional employment after graduation.

Despite this, international students continue to arrive in record numbers, with the most recent figures showing that there are now some 753,000 international students in Australia and 380,000 of them in tertiary studies.

Back in August, The lobby group representing foreign students in Australia – the Council for International Students in Australia (CISA) – admitted that many foreign students study in Australia to gain permanent residency:

The Council for International Students in Australia said foreign potential students were attracted to Australia by the possibility of migrating here.

But Mr Dutton’s strong views on border policy and his statement that Australia should reduce its intake of migrants “where we believe it is in our national interest” would tip the balance for some would-be students…

The national president of CISA, Bijay Sapkota, said… “For people coming from low socio-economic backgrounds there has to be a value proposition. If they go home they will not get value. So there has to be a possibility of immigration.”

He said international students were not satisfied with the way Mr Dutton had run the immigration portfolio, where some visas were at risk of being closed down at any time…

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Basically, Australia’s university sector has become a giant rent-seeking business that is a key beneficiary of Australia’s mass immigration program via clipping the ticket on the deluge of foreign students arriving in the hope of transitioning to permanent residency.

The end result is: the erosion of standards and too many university graduates chasing too few professional jobs; 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.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.