Professor Salvator Babones, author of last year’s explosive report on Australian universities’ extreme over-reliance on Chinese international students, now believes that these institutions are facing “catastrophic declines in revenue” from the China travel ban:
“It’s an unprecedented event affecting universities,’’ Assoc Prof Babones said.
“This is going to kill Semester 1 for everyone.
“It’s a risk of catastrophic declines in revenue.
“It would be very worrying and I would be scrambling to do what I could”…
According to official estimates, there are currently around 106,000 Chinese students blocked from entering Australia to commence their studies – a figure Babones believes may be conservative:
The number of Chinese students estimated to be stuck in China was conservative because it didn’t include new-starters yet to get a visa.
“Australian universities’ exposure to international and Chinese students is off the charts,’’ he said.
“They became vastly overexposed in the pursuit of increased revenue.
“They are extraordinarily reliant on Chinese students more so than any other universities outside of China.
“They should be able to meet the impact out of financial reserves and or borrowing.
“But they certainly will feel a substantial financial impact from the coronavirus epidemic.”
In particular, the impact on the elite Group of Eight (Go8) universities in Sydney and Melbourne will be extreme, given they are reliant on international students for one-third or more of their revenue:
All of which makes Babones’ warning in last year’s research paper prescient:
Australia’s universities are taking a multi-billion dollar gamble with taxpayer money to pursue a high-risk, high-reward international growth strategy that may ultimately prove incompatible with their public service mission. Their revenues have boomed as they enrol record numbers of international students, particularly from China. As long as their bets on the international student market pay off, the universities’ gamble will look like a success. If their bets go sour, taxpayers may be called on to help pick up the tab…
Australia’s universities do not seem to understand the high levels of financial risk inherent in their overreliance on the Chinese market…
Chinese enrolments are particularly unstable because of macroeconomic risk factors… macroeconomic risks are by far the most serious (from a financial perspective) because they could lead to a sudden and severe fall in Chinese enrolments…
Australian universities’ current prosperity is based on a flood of international student money — Chinese money in particular. The seven leading universities spotlighted in this report are taking massive financial risks in pursuit of this pot of gold. And just like the world’s leading banks in 2008, they must be aware that they are ‘too big to fail’. As public and publicly accountable institutions, they enjoy an implicit guarantee that if things go wrong, the government will come to the rescue. They should act now to mitigate the risk of a sudden revenue collapse by raising admissions standards and reducing international student enrolments.
Truer words have never been written.
At this stage, Education Minister Dan Teehan is resisting calls for a bail-out of universities. But the longer the fallout from coronavirus drags, the louder the calls will get.