Are international students really a $32b export industry?

By Leith van Onselen

Over the past four years, Australia has experienced a huge lift in international students, with arrival numbers nearly doubling to around 600,000 in the 2018 calendar year:

The boom in international student numbers is frequently hailed as Australia’s third biggest export, generating $32 billion in export earnings in 2017-18:

 

However, as noted by the Department of Foreign Affairs and Trade in footnote (c), this $32 billion in export revenue “includes international student expenditure on tuition fees and living expenses”.

Therefore, to the extent that these tuition fees and living expenses are paid for via income earned by working in Australia, they do not comprise genuine export earnings, but rather simply economic activity.

To explain, consider an extreme example of a student that arrives in Australia to commence a three-year undergraduate course in Accounting. That student pays for their first semester upfront ($15,000) using money raised offshore, but then funds the rest of their stay (university fees and living expenses, which costs $50,000 per year) via working various jobs.

DFAT’s definition suggests the entire $50,000 in fees and living expenses per year is counted as an export, when really only the initial $15,000 upfront payment should be, since only it represents a financial transfer from overseas to Australia for services rendered.

Indeed, to the extent that international students pay their fees and living expenses via employment within Australia, they are no more an ‘export’ than a full-fee paying domestic student.

Based on the above reasoning, the reported $32 billion in export earnings could be way overstated; although it is impossible to know what the true number is.

Happy to be proven wrong.

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Unconventional Economist
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Comments

  1. You are 100% right.

    The true export value is very hard to know, but is way lower than the face value stated by politicians and the education industry. The fact many international students are working for cash (often in their cultural enclaves such as Thai massage bars or Chinese restaurants) makes it impossible to know the truth.

    • These students are the very people who are going to be unable to live in Australia once the consumer crunch really bites. Bye bye cheap labour, student fees and slumming tenants. Feedback loops are a biatch.

      • No way a recession would send people back to India etc. Not sure if you’ve been there, but it’s much better to be poor in Australia than poor in India. Free health care and education for you and your family for starters.

        WRT the above analysis, it also doesn’t take into account remittances back to the students home country.

      • @UE. This:

        https://www.instarem.com/blog/remittances-how-much-money-do-migrants-send-home/

        quotes World Bank 2018 figures of US $1.9 billion remitted from Aus to India. I doubt that captures all of it. Obviously need to divide by all Indian residents and weight (?less for students vs FT workers, who may send more).

        My point on alleged economic benefits to Australia of migration (beyond the student sector) has always been this practice of not spending locally. You see it the most in the bush where overseas born hospital staff – Drs, nurses, cleaners, wardies – usually the highest paid workers in the town – basically live on the smell of an oily rag and send nearly all the money back home and the local businesses wither and die.

      • Oops! I see you guys are onto the remittance issue already, I really should read all the comments, not just the first, before replying.

      • Regarding people going back home: If you can’t maintain employment thus afford accommodation, food and fees, then you can’t stay here. Many working visas require employer sponsorship to keep you in the country. The period between jobs could be no longer than 40 days (no idea what it is now). A destitute illegal immigrant isn’t going to get much love as the country goes down the gurgler.

      • Does the UN perhaps downplay remittances to India, as an example, so that Australia provides more in aid and is more agreeable with trade agreements with India?

    • Exactly right, even if they don’t earn the full $50’000 it is likely a large chunk. I’ve never believed those figures.

      Also we shouldn’t forget the $15,000 upfront fee (or any other money borrowed overseas) for those students that stay they will have to repay those debts from the money they earn when they work in Aus, is this subtracted from the “export” earnings in later years? No, so the headline figure must be even further off. I’d say exports from reduction is only marginally positive overall in the long run.

      • Yes, the overall inward money is far less – this number is again decimated by the costs borne by Australia in the form rising infrastructure costs, lost employment opportunities for locals (particularly in low-skilled and entry level positions), reduced amenity, lost tax through cash-in-hand employment, and administration costs (reviewing costs, checking compliance of visa holders), plus costs associated with visa fraud and visa appeals. I would say a loss making industry for Australia overall.

      • Yes, lost opportunity costs should also be factored in. Every time an Aussie kid (& these days they are not all Anglo) loses out to a foreign worker they likely miss a lifetime of opportunities, even if they don’t end up on the social. Result they are likely to grow up pissed off feeling foreigners get a better deal, leading to increased racism etc, every now and then one will go postal

    • You are wrong. The author is wrong. Only a very small fraction of students can pay tuition fee by working jobs, on the contrary, most students bring money from their savings or bank loans from their home country. When they graduate, usually the more competent ones stay back, get jobs in related fields and help the economy grow.

  2. “That student pays for their first semester upfront ($15,000) using money raised in India, but then funds the rest of their stay (university fees and living expenses, which costs $50,000 per year) via working various jobs.”

    You mean to say that these Indians can somehow earn $50k, after tax, after wage theft, after undercutting the locals?

    Nah, not gonna happen. Not in Straya.

  3. My poor son.
    Thanks howard gillard rudd Abbott and morrison.

    A trashed uni sector with floods of graduates. The uni experience wrecked as ubisoft bend over backwards for internationals who rarely mix with locals.

    This country is stuffed. Literally. No future at all. Our elite and leaders have sold you and I out. And our kids.

    Australia 2100. A chinese australian PM. A large Asian elite in charge of the professions and finance. Various third world types doing menial work. Anglo euros an increasing minority who lack the ethnic identity to put up a fight and are increasingly swamped. The elite live in gated communities. Vast masses in sweaty gridlocked streets.

    This is australias future bar some massive pandemic or massive economic collapse or nuclear exchange. It has been set and is sure as anything as its all about attitude and your current elite is happy to sell you and your kids future for a few shekels.

    • Stewie Griffin

      +1 JS

      Australia is no longer a nation, society or culture. It is an economic zone which imports other people and cultures to compete against each other. The goal is to destroy any national identity other than tolerance of being forced to live cheek by jowl against people whose values you may dislike and who dislike yours.

      Individualism is celebrated, while “society” simply contracts down to its most primitive form, like minded population groups bounded by their own in group cultural values, operating in a common economic zone and whose only commonality is the legal framework underwhich they do business.

      In such a nation it becomes impossible to act in the social good, when the society is filled with people and cultures you have no interest in aiding their ability to perpetuate themselves into the future. The only alternative in such a society to the provision of no services is the provision of private services.

      Quite simply the social trust needed to maintain strong institutions that act in and for the public good get eroded and things like public education become impossible, and the only way these services can be delivered is to charge for them.

      This is the strategic goal of every policy being pursued in Australia.

      • Yep. I wish I knew how to convince other people that this is what the game is. The framework that most people look through is the happy clappy multi culti one and anyone threatening this is lovely picture is viewed as a hostile to be eliminated post haste!

    • @Jada: Australia’s time in the sun (puns and global warming to one side) has come, and gone. Four decades after the War and that was it. Clinging to dreams of the way we were is just a fast track to bitterness.

    • When the immigrants are running things there will be no more immigration from 3rd world as they won’t be blackmailed by the Greens etc calling them racist & they won’t want to be remedied of their poor roots! This happens everywhere always whether UK during industrial revolution, China today or Australia next generation.

      • Or will they be okay with poor migrants from their home countries, so they can get cheaper labor and be reminded how far they have come?

        Perhaps migrants and their children from the subcont1nent will enjoy being served by an 1ndian-Fijian, or a non-Punjab1 Indian cleaning their house?

    • Export influence tooMEMBER

      See the articles on the NSW election on the Kogarah seat at the state election.
      If you want a soft power conspiracy theory a Communist party Chinese supported politics seems like a good idea.
      The candidate was praised widely in the press in China and states he has a network of supporters ready to go if he gets a preselection for a federal seat as a “star” candidate. “Star” candidates bring either a name (eg a sports person) or a network of donors for the cash strapped liberal party.

  4. Over a lifetime, they import cars, phones, clothes, appliances, petrol, jet fuel, food, furniture, toiletries.

    $20k car for husband and $20k car for wife imported every 10 years = $160k over 40 years, $500 phone imported every 3 years = $13k over 40 years. $1500 on petrol and car parts per year = $60k over 40 years. Trips to Delhi = $20k over 40 years. Furniture, clothes, toiletries, jewellery, appliances = $20k.

    That is $273k of imported goods per imported couple. Plus their kids will import toys, clothes, iPads, cots.

    It is not an export. If it was an export, Japan and Dubai would be doing it.

    Dubai deports foreign workers upon retirement.

  5. there are three kinds of students
    – “real” uni students (those who came primarily to study to get at least a Bachelor degree on a real universities and account for around 20% of all students) they bring more money (often not having a job here or just during holidays) and sometimes even cash for new cars and deposits for property purchase – they often find jobs after completing degrees and stay as well

    – “immigrant students” who enroll at real unis or some other level but primarily because they need to to get working permits. They bring some money but not enough to pay for everything so they work while studying to pay for fees and costs, some of them are really good students, most of them complete a degree and they find permanent jobs and stay at the end (they account for maybe 50% of all students)

    – fake students who study on dodgy “show up once a week” educational institutions, have real jobs in construction, retail, daycare, … came with no much money and no real intention of staying here but to earn money, and return home with cash. Some of them stay here at the end but many go back with money earned (they account for around 30%)

    there are few who fall between the groups but they are minority

    On average I think maybe a third of those $50k for student expenditure on tuition fees and living expenses” come from overseas

    • I will add another group. The ‘holiday’ uni student doesn’t really want to be here but mum and dad in China have shipped them over because they are too dumb to get into a good Chinese university. They often don’t work and just spend their time hanging out with other Chinese.

      My experience is that places like UNSW are full of this type. Rich dumb and disengaged.

      • they are in the first group – despite being “Rich dumb and disengaged” they are here to get a degree and they will get one after presenting paid invoices

    • Lenny Hayes for PMMEMBER

      I think those percentages are also skewed depending on the nationality of the student.

      Nepal is one of the top 10 sources of students to Australia – they must have a pretty good education system that allows students to slot seamlessly into Australian standards…..

    • Strange Economics - Residency for Tennis Coaches?MEMBER

      Group B also need to buy an apartment to support the property industry as a temporary resident. Then they get PR after a year of work after graduation.

    • Julia Gillard changed the visa rules to bring some integrity back into the situation after Howard. Tony (with Scummo as immigrantion minister) opened the flood gates again.

      • Gillard was honest and shepherded them all DIRECTLY into the housing market by effectively abolishing FIRB rules.

        The Libs are less honest, so made them access the housing market indirectly, through pretend study.

      • Prior to the Gillard changes, huge numbers were coming here to study things like hairdressing and hotel management, due to alleged “skills shortages”. There were so many barber shops in Parramatta that you could get your hair cut every week for a year and not visit the same place twice.

      • ErmingtonPlumbingMEMBER

        Managing skill shortages is part of “Managing the Economy”.
        The question should be, Managing The Economy for who,….or whom,…not sure which one to use.
        Who or whom?

    • Mining BoganMEMBER

      Okay. So why isn’t this info spread around to show why students are really here?

      Surely being racialist doesn’t explain everything.

  6. It’s so bloody obvious but sometimes the obvious needs statting. You could throw in the charts of NSW”s and Victoria’s massive trade deficits with overseas countries to drive the point home. But otherwise, very nicely put.

    • It needs to be mentioned, they’re the two big education states, and both have seen their overseas trade deficits explode.

  7. TailorTrashMEMBER

    Did blind Freddy write that headline question ?
    …..dishonest politicians , greedy grasping vice chancellors and other over paid university “ executive deans “ ,compliant or stupid unquestioning media and a moronic uninformed general populace sure as fcuk provides the answer .

    • The average punter doesn’t stop to think about it. They just see a huge headline stat and accept it at face value as they carry on with their normal routine. That’s how pollies and their MSM propagandists work.

      • ErmingtonPlumbingMEMBER

        Early in my trade on large construction their was much contempt for the “Uni Builders” on site.
        Builders who had worked their way up from the tools and getting their more advanced qualifications later in their careers were the only Builders/Construction managers considered worthy of respect.

    • Stewie Griffin

      India’s engineers are better than China’s—but so much worse than America’s

      LOL – so true. This reminds me of an article I read over the weekend:

      https://technology-info.net/index.php/2019/03/19/thinking-caused-by-boeings-air-crash-the-landing-of-autonomous-driving-technology-needs-to-be-treated-rationally/

      “Therefore, when the aircraft is in normal flight, the MCAS anti-stall system automatically presses the nose and the aircraft enters the dive state. After the pilot repeatedly took rescue measures, the man still could not “snap” the machine, and the plane continued to swoop until it crashed.

      According to sources, relevant people in the United States said that this is due to the existence of a software program written by Indian programmers. It is reported that the control software of the MCAS anti-stall system was developed by Indian engineers, and the Indian design concept is to let the machine make decisions for people, and the control authority of the machine is higher than people. When the control of the machine conflicts with the will of the person, the system does not perform the willingness of the person to control.

      In short, before the plane crash, the Boeing-737 Max 8 pilot is likely to try everything to switch to manual control, but the autopilot program does not allow the pilot to take over.”

      Culture matters a great deal in the approach to how you solve problems.

      • drsmithyMEMBER

        Yes, the French are well known for their ceaseless deference to authority, which is why for thirty-odd years Airbus planes have operated in this fashion.

        Who’s got a car with a rev limiter ?

      • drsmithyMEMBER

        On an Airbus, the flight computers impose the limits. It’s a difference in design philosophy.
        https://www.google.com.au/search?q=airbus+can+pilots+override

        Also seems MCAS can be disabled:
        https://www.google.com.au/search?q=can+boeing+mcas+be+disabled

        I would also be extremely surprised even in this day and age, if Boeing were outsourcing the design and implementation of critical flight systems solely to Indian development teams. They don’t have a good reputation for quality.

      • On an Airbus, the flight computers impose the limits. It’s a difference in design philosophy. You mean differing cultural values gave rise to different design philosophy…

        Numerous parts and components are subbed out – the critical technology which is never subbed out is around the engine and the wings… or was, I think Boeing or Airbus was under pressure when China, still a wolf in sheep’s clothing being fawned over by Globalist CEOs and the Wests politicians, managed to get the wings. I remember reading at the time that those were the last final sacred cows. Not sure how it resolved.

        There was no denying that the MCAS was capable of being switched off. The issue was that it was not intuitive and required additional training on a flight simulator in order to learn what to do. In fairness to the Indians, Boeing should have made training to fly the 737 – max mandatory, but that would have required expensive deliveries of flight sims and training.

    • I’m in the IT industry and the racialist ones are those who will only hire those from the same racial background even if there were much stronger candidates available. Often recruitment has very strong nepotistic overtones.

      • I have a mate who works in IT recruitment – for some reason he finds it is far easier to bring in Level 1 or 2 IT technicians from India who can barely speak English than to bring in a senior developer from France who speaks perfect English.

      • These Level 1 or 2 technicians can’t construct an email, so the ‘fix’ has to be translated by someone in a call centre to write the ‘fix’ email for them. So the poor customer has to wait for the ‘fix’ whilst the solution gets bounced around and waits in a work queue.

  8. Are international students really a $32b export industry?
    Does it matter?
    I mean really does it matter if this additional GDP really results from Export Income?
    Looked at another way, What percentage of Australian labour results in true Export Income? (sad isn’t it)
    So if this is not Export Income, what does that mean? will there be capital shortages? Ignoring very recent developments there’s zero evidence of operational Liquidity problems wrt the Australian economy. The necessary capital is available, it’s available even though we’re apparently not earning this “Export Income”…How can That be? (we all know the theory that ties Balanced Trade to Exchange rates, it’s a corner stone of 20th century thinking…so it must be right…right?)

    If we’re going to go down this path, than: Are our Coal exports (now dominated by a Swiss company’s sales) really Aussie exports? Where does this revenue go? where do the profits go? what are the major operational expenses? What percentage of this coal revenue is really Aussie Export Earnings?
    OK but the situation must be different with Rio or BHP right? Not if you look at the shareholder register, and not if you look at their major operational expenses, not even Aussie if you look at the capital structure (bond issuance etc)
    Damn so our top three Exports aren’t really Exports in the traditional sense but more Valued added activities for Transnational corporations, so which Export number should we use the headline number, or the considerably lower Local Value Added number?
    Hmmm sad isn’t it?
    But just to reiterate We have no shortage of Liquidity and a fairly solid Exchange Rate, so 20th century thinking tells us that there must be hidden value in this Export Income Or otherwise we might start thinking that our 20th century Exchange Rate theory should have been left where it belongs in the 20th century.

    • As someone here in the last day or so very astutely pointed out (apologies I cannot recall to give credit)

      Need != Fundability

      There is a huge shortage of nurses in this country if you go by what workforce is needed to provide the alleged world class medical care that Australia is supposed to have. That shortage is much less if you go by the workforce numbers that Governments are prepared to pay for. Ditto Drs, Physios, OTs, Pharmacists.

      The only health role funded in excess is f#$king medical administrators!!!

      Edit: it was Jacob:

      A lot of left wingers in Australia confuse demand for fundability. Increasing demand does not mean increased funding! In 1928, it was decided that Doncaster and Glen Waverley should get railway lines. 90 years of immigration later, Doncaster still does not have a railway line!

      The immigrants on $10/hour wages are not increasing the fundability of any infrastructure.

      +1000

    • TailorTrashMEMBER

      Sitting in a medical centre the other day and picked up a copy of The Lamp from among the reading materials.
      The Lamp is the Union journal of the Australian nurses and midwifes association (union) ,
      Taking prominent place was an article by Sally McManus where she is quoted “Our jobs have been casualised , offshored and outsourced . Forty percent of the workforce is now in insecure work .A whole generation does not know what it is like to have a paid sick day or paid holidays “

      Well good on ya Sal ……you recognise the problem …….but why then have you joined up to an immigration covenant to bring in more third world workers who will accept and perpetuate these conditions ?

    • And we make it easier for them to leave with the direct flight from Perth to Heathrow. Simples.

  9. It is certainly a gamed figure, and thoughtful economists should be discounting the amount quoted by the politicians and the university sector. In all possibility it is also a non-profitable export as well, that is really merely redirecting public money.

    • TailorTrashMEMBER

      Yes good point …..I’m sure a good thorough analysis would show that is great “export “business is getting very nice subsidies

    • So you don’t think a thoughtful PhD student will get university and scholarship support to do a proper analysis of the cost-benefit of the foreign student market to Australia?

      • Lol. I do suspect that it would be much easier to get funding for ‘Why do kids that watch too much tv get fat’, than ‘Quantifying the real costs and cross border capital flows under current foreign student policy”

  10. I lived with a large number of international students while doing my degree (uniformly excellent people by the way), and none of them could have worked enough hours to be self-funding. Everyone needed money from overseas to survive. Every single one. Even those who worked cash-in-hand for reasonable long hours were mostly using this for spending money, not tuition/housing. Let’s imagine a student working for $9 an hour cash-in-hand (a not uncommon rate) x 40 hours a week (which almost none do because they’d be unable to study, too). Assuming they work 52 weeks a year (again, an unlikely amount), that’s $18,720. This imaginary student–who would be an exceptional case and not a normative one–would thus still be adding a net of $31,280 into the local economy. I suspect the real average figure would be somewhere in the $40ks in terms of net transfer overseas per student. So, yeah, overstated, probably but a still significant figure. Also worth noting: a ton of these students are very wealthy and absolutely do not work at all.

  11. The overall net inward money is far less – this number is again decimated by the costs borne by Australia in the form rising infrastructure costs, lost employment opportunities for locals (particularly in low-skilled and entry level positions, and don’t forget the partners of students get full working rights), reduced amenity, lost tax through cash-in-hand employment, and administration costs (reviewing costs, checking compliance of visa holders), plus costs associated with visa fraud and visa appeals. I would say a loss making industry for Australia overall.

  12. There is a lot of fat that could be trimmed from the Universities so the fat cat VCs aren’t relying on the foreign students as much.
    If VCs trimmed the fat, they would only need a small number of foreign students. Reduced foreign students would increase education quality. Increased education quality would attract the smarter foreign students. We could become selective and attract the smart students who could also afford to support themselves without the need to work (and thus won’t need working rights).

    But that is assuming universities aren’t visa factories. And VCs aren’t empire builders chasing what they think is an appropriate fat cat salary.

  13. …..That student pays for their first semester upfront ($15,000) using money raised in India.
    The money raised in India is often borrowed to meet the requirements of being granted a student visa. Once they get to Australia all they need to do is study in a “bodgy” college, work as many jobs as possible and work on scamming the system to get PR. There is a difference in Indian visa holders nowadays. The original onshore skilled migration (s/c 820) scammers were all Indian Punjabi Sikhs. They’re the ones now working menial jobs because their qualifications were paper only having bought their work experience reference to get PR. The later arrivals appear to more affluent and hopefully genuine immigrants.visagetting

    • So these later ones are more affluent? So less likely to be gaming the system and less snooty?

  14. At the rate they’re buying property in my area, they’re not short of money. Comments from real estate companies support my view.

  15. There is also the amount of money that the government are paying locals to stay on the dole, because our kids are unable to get a job due to being undercut in wages by foreign students, on Airtasker last week someone was advertising for an Indian cleaner.

  16. A few different types of students I’ve noticed coming to Australia to learn / improve their English supposedly to get into English speaking unis (anywhere in the World).
    One group is students funded by borrowing from extended families to get here then struggling to pay them back and having enough money left to live. Does taking low paid jobs count as exports?
    Another group is funded by rich mummy and daddy to get them out of their country where there is little employment so kids can get up to lots of trouble as they are bored! eg https://tradingeconomics.com/spain/youth-unemployment-rate.
    Seemed to be a lot of low quality / high volume players come into the market after 2009 so I suspect “quality education”, at least as it relates to learning English, is not a big export any more. Frankly, the high cost of housing is pricing Australia out of this market (until the currency drops again).