International student losses to cause university financial crisis

The ANU’s Andrew Norton has warned that Australia’s universities are facing a possible “financial crisis” from the sharp loss of international student revenue:

For Australian higher education the situation of international students in the COVID-19 crisis is especially concerning. They lack the local family and social security back-ups of domestic students. It leaves them particularly vulnerable as large parts of the student labour market collapse.

And if international students have to go home or cannot pay their fees, that is the most likely trigger for a broader higher education sector crisis. At best, thousands of higher education workers will lose their jobs. At worst, many universities will need government intervention to survive…

As the chart below shows, again using 2016 data, more than 40 per cent of international students who have been in Australia for less than 12 months report wages as their main source of income. The proportion relying on wages increases as they stay longer…

Meanwhile, Phil Honeywood, chief executive of the International Education Association of Australia, has demanded international students receive welfare, as has the Group of Eight Universities:

[Honeywood] said if international students facing hardship were not given government support, the situation would soon be catastrophic.

“Before too long we are going to see desperate unemployed international students on the street with no tangible means of support,” he said…

Group of Eight CEO Vicki Thomson said that Australia could not just be a “fair weather friend” to international students who “underpin our $40 billion international student industry”.

“Now, more than ever we need to support these students, many of whom have lost their jobs and are ineligible for any financial support,” she said.

For its part, Labor has demanded taxpayers bail-out the university sector:

Tanya Plibersek has called on the Morrison government to provide low-cost loans and guarantee universities’ funding, warning some are at risk of collapse due to falls in international enrolments during the Covid-19 crisis…

Plibersek told Guardian Australia that there are “now serious concerns that without federal government action some leading institutions could collapse”…

“Australian universities are under immense pressure,” she said. “For years, universities have used income from international education to help fund their world-leading research…

“Australia cannot afford to let our universities fall off a cliff. The federal government must act now to shore up our universities”…

“If the federal government fails to act now, some universities could collapse, which would see vital research cut, thousands of jobs lost, and leave students hanging in the middle of degrees.”

Let’s not forget that just over a month ago, the universities lobbied hard for the federal government to keep Australia’s international border open. They also provided financial incentives of up to $7,500 for Chinese students to evade Australia’s travel restrictions via third countries like Thailand.

Thus, our enlightened universities likely exacerbated the coronavirus spread.

We should also remember that the universities filled their boots from the gigantic boom in international students enrolments and fees, as illustrated clearly below:

Australia’s rent-seeking universities have displayed textbook ‘moral hazard’ behaviour. They sought to privatise the financial gains from international students evading the travel bans before socialising the welfare and health costs on the Australian taxpayer.

The universities, not Australian taxpayers, should be made to pick up the financial costs of supporting international students through this crisis.

If some universities collapse as a result, so be it. It will impose market discipline on them for the future and eradicate the toxic moral hazard culture that has developed. It will curb the extortionate pay of vice chancellors and senior administrators. And it will help return international student numbers to sustainable levels, in the process improving entry and teaching standards.