Universities face $4.6b hit on international students

Universities Australia estimates that the sector’s revenue could fall by about $4.6 billion in 2020 due to the coronavirus pandemic, while 21,000 full-time jobs could be lost over the next six months:

Universities Australia warned that the coronavirus crisis could result in the loss of 16 per cent of the university workforce, or 21,000 full-time jobs, over the next six months, with ­another major round of job losses likely to follow that…

The group said that universities were facing a conservatively estimated $4.6bn revenue hit this year due to the coronavirus…

Accordingly, the university sector is demanding that they be treated as registered charities so that they can access the lower 15% turnover test to access the federal government’s JobKeeper wage subsidy scheme:

Major universities were expecting a massive coronavirus bailout worth over $2 billion this morning after a late night tweet from Treasurer Josh Frydenberg on Sunday announced that the government would increase access for registered charities to its $130 billion JobKeeper scheme…

All universities are registered as charities with the Australian Charities and Not-for-profit Commission so the import of the Treasurer’s words was clear. Universities, hard hit by the fall in Chinese students, would receive over $2 billion from the JobKeeper scheme to subsidise thousands of jobs which otherwise may be lost in coming months.

But the Treasurer misspoke… a senior government source said on Monday that universities will not be given the special access to the JobKeeper package which is being offered to other charities…

The major universities in the Group of Eight, which have high numbers of Chinese students and are particularly hard hit by the coronavirus travel bans, feel misled…

It is hard to take the universities’ charities claim seriously. For years they have acted like profit maximising corporations raking in billions of dollars from international students often to the detriment of local students.

They have also paid their vice chancellors and senior administrators obscene sums of money more akin to major private corporations.

The below charts tell the story. There were an obscene 442,000 international students enrolled at Australia’s universities (‘Higher Education’)as at the end of 2019, up 91% from 231,000 in 2013:

In a similar vein, university international student fees rocketed to $12 billion in 2019, up 143% from $5.0 billion in 2013:

Now the international student ‘rivers of gold’ are dissipating, the universities are predictably crying poor.

Risk management is a core responsibility of any business and you would think that universities, full of such academic talent, would be all over that skill set.

Instead, Australia’s rent-seeking universities are displaying classic ‘moral hazard’ behaviour. After privatising the financial gains from booming international student enrolments, they are now seeking to socialise the losses on taxpayers as student numbers retrace.

The federal government must not come to the universities’ rescue and must make them stand on their own two feet.

This is the only way to eradicate the toxic moral hazard culture that has developed and to curb the extortionate pay of vice chancellors and senior administrators. It will also help return international student numbers to sustainable levels, offering spillover benefits to both entry and teaching standards.

Unconventional Economist
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Comments

  1. What chance we’ll see VCs douse themselves in gasoline, light up and run screaming across campus?

    Okay, pure fantasy, I know ..

    How about VCs taking a whopping 10% pay cut while sacking thousands of staff?

    Sorry I mentioned it.

  2. Leith, all those points you raise about Unis and privatising gains are true, but then it is true for most sectors in this country.

    If it’s ok to support the employees of tourism or hospitality or small manufacturing or trade businesses that are going to be steamrolled through no fault of their own, then why not the same for Uni staff ? Isn’t the principle the same ?

    You can cut the salary of every University sector executive to zero, it still won’t save the thousands of jobs that are going to be wiped out.

    The adjustment to a new world can’t happen overnight. That’s the principle behind the whole JobKeeper subsidy.

    • buttzilla twenny

      I don’t think there’s any saving the industry anyway. Massive malinvestment into foreign students & accommodation. They are simply NEVER COMING BACK! CHINA HAS TURNED INWARD. IT IS DONE!

      • But India is still available. Indians are poorer so uni’s will need to replace 1 Chinese with 3 Indians to make up.

      • Will they lose from accomodation? They didn’t have to pay for that land, should be no problem undercutting the private sector.

    • If the Uni’s didn’t facilitate 30K virus spreading “students” coming into the country via the back door maybe we wouldn’t be in this pickle.

  3. rob barrattMEMBER

    I don’t understand. All we need to do is set things up so that:
    a) The Chinese/Indian student posts the university the money. then:
    b) The university sends them the degree.
    It’s more or less exactly how things operate now except for the tiresome requirement for them to attend lectures which most of them didn’t understand anyway. In a system which is designed for everyone to pass it’s the next logical step isn’t it?

    • Large scale knocking shops. Thousands of small student rooms filled with people furiously r00ting, while wearing full body wetsuits with snorkels and diving masks to avoid virus contamination.

      Can I copyright this idea?

  4. adelaide_economistMEMBER

    Yes, the universities are so concerned about their staff, that’s why the VCs pay themselves $1m a year while pretty much all the staff under 40 are on casual or short-term contracts – and that’s been this way when times were ‘great’, long before covid19.

  5. Charities get FTB exemptions on salary packaging/sacrifice. Can’t wait for something like that to be released onto the Uni execs.

  6. Except the Vice Chancellors won’t be the ones getting a pay cut. It will be the casual staff that lose their pay for contracts cancelled.

  7. All true Leith, but you keep missing the point that the fundamental reason why Universities have become so dependent on international students is that governments have cut funding to the sector while also encouraging greater enrolments. At the same time, there has been an explosion in research audit and rankings culture, which has also encouraged Universities to seek more international enrolments to cross subsidize the expansion of their research programs in order to boost their research funding from government. Ironically, much of this research output is then captured by monopoly private publishers at taxpayer expense while also encouraging academics to publish useless outputs under the ‘publish or perish’ job security culture. In addition, in a desperate bid to attract both domestic and international students, Universities have shifted money away from teaching budgets to devote to campus infrastructure and student services (like counselling, disability and student welfare services- they are all extremely important but demand is exploding faster than many Universities can cope with). Let’s not also forget that most of the teaching (and many of the research) staff are lowly paid and highly exploited casuals or fixed term staff…let’s not gloat too much about this situation, as they are the only ones who are going to shoulder all of the risks, costs and pain.

    Any analysis which ignores, or underplays the above, is just fundamentally not understanding the problems confronting the sector.

    Disclosure- I work at a public University.

  8. We also need also to remember the thousands studying vocational degrees. TRA do not test skills anymore. From 2007 they have been assessing competencies “on the papers”. This is where the real immigration fraud is occurring, mainly by the Punjabis, Nepalese and South Americans. It’s easier to get PR via a “bodgy college” than through a university.