Dr Bob Birrell and Dr Katharine Betts from the Australian Population Research Institute (APRI) have released another terrific research paper, entitled “The Crisis in the Overseas Student Industry: How should Government respond?” which highlights how Australia’s Group of Eight (Go8) Universities have shafted domestic students in the greedy pursuit of international student riches, especially from China:
As Table 1 indicates there has been an explosion in the level of overseas student enrolments relative to domestic student enrolments since 2012.
The growth in overseas student enrolments has been very strong in the Group of Eight universities. By 2018 near half of all commencing student enrolments in these universities were overseas students.
In the case of the Go8, most of the students came from China. In other Australian universities the share of commencing students who were from overseas was lower, on average 28 percent in 2018. In their case most overseas students came from the Indian subcontinent, especially India and Nepal.
The Go8’s enrolment of overseas students has given a massive boost to these universities’ revenue. They have been able to charge $40,000 plus a year for their undergraduate and for post-graduate Masters courses. Other universities charge around $25,000 a year for the same courses.
Overall, total Australian university overseas student fee revenue more than doubled from 2012 to 2018, increasing from $4.1 billion in 2012 to $8.9 billion in 2018. By 2018 this revenue amounted to 26 per cent of total university revenues, and represented an increase of 117 percent.
By contrast, over the same period Australian Government Financial Assistance increased from $14.67 billion to $17.62 billion, an increase of 20 percent.
The Go8 universities were the main beneficiaries of this surge in overseas student fee revenue.
For example, total revenue from overseas student fees increased from $285 million in 2012 to $884 million for the University of Sydney in 2018. By 2018, this overseas student fee revenue accounted for 34.1 per cent of the University of Sydney’s total revenue of $2.589 billion.
In the case of Monash University this fee revenue increased from $319 million in 2012 to $852 million, by which time it also made up 34.1 per cent of the University’s total revenue. This was $2,498 million in 2018.
What have the universities done with the fee revenue from overseas students?
In the case of the Go8 universities, they have not used the increased funding to train more domestic students. This is despite the fact that until recently the Australian government has allowed some increase in domestic enrolments. The Go8 could have increased their domestic enrolments if they had wanted to. They chose not to do so.
Their domestic enrolments of commencing students (at all course levels, including post-graduate) shrank from 87,939 in 2012 to 85,529 in 2018 (a drop of 2,410). In sharp contrast, the number of commencing overseas students at Go8 universities increased over the years 2012 to 2018 from 30,320 to 62,423, an increase of 32,103.
In other words, the Go8 have used what capacity they had to increase student commencement numbers to accommodate overseas students. The main field of teaching has been business studies with courses tailored to meet the capacities of the overseas students enrolled.
In the case of the Go8, where enrollees are primarily Chinese, this has meant that teaching staff have had to adjust these courses to the limited English capacity of most of their students.
On the other hand, the annual number of commencing domestic students in non-Go8 universities have increased over the same years from 282,375 to 323,841, an increase of 41,466. But they too have taken an expanding share of the overseas student bounty. Their overseas student commencement numbers grew by 53,737 between 2012 and 2018 (from 72,820 to 126,557).
So what did the Go8 do with their overseas student fee revenue? Much of the additional revenue has been directed to their research effort. The focus has been on a research output acceptable to high status international publications. This reflects the priority that the Go8 gives to their research prestige and the link between these international publications and each university’s ranking on the global research rating lists.
Universities that can make the top hundred on these lists are attractive to Chinese students. The Go8’s ability to charge very high fees stems from this. The Chinese are buying qualifications from high research prestige universities.
The Go8 have also invested heavily in the renewal of their campuses, featuring expensive buildings, landscaping and new research centers.
University bureaucracies have also benefited. At the Go8, non-academic salaries cost almost as much as academic salaries. At the University of Sydney by 2018 the University paid $517 million for academic salaries and $478 million for non-academic salaries. Monash University paid $508 million for academic salaries and $472 million for non-academic salaries in 2018.
The researchers note that the Go8 universities will be especially hard hit by the decline in international students:
The Prime-Minister, Scott Morrison, has put a dent in universities’ claims that Covid-19 has left a serious hole in their revenue. On May 26 he stated that by the end of April 2020 80 per cent of those holding overseas student visas were in Australia. He declared that the way it’s talked about you’d think that they weren’t.
Morrison’s numbers are right.
The Go8, however, will not escape revenue damage even in the first half of 2020. This is because most of the 20 per cent not here were Chinese students. Some 67,919 of the total of 177,442 Chinese citizens holding student visas were not in Australia at the end of March 2020. Since March 20 they cannot come (or return) to Australia. Thousands are likely to defer or delay their studies in Australia, thus diminishing the fee revenue Australian universities, especially the Go8, had budgeted for.
The seriousness of the revenue crisis, not just for the Go8, but for all universities relying on overseas student revenue will deepen over the year 2020-21. This is because normally about half of those taking up higher education student visas do so in the second half of the calendar year. It is likely that few will do so this year. The numbers are also likely to drop in the first half of 2021.
In 2018-19 the Australian government issued 142,098 higher education visas off shore. Only a fraction of this number are likely to be issued in 2020-21. This, plus attrition from students completing courses, means that the number of overseas students enrolled in higher education Australia could fall by up to a half by mid-2021.
The Go8 will take the biggest hit. In addition, these universities will lose substantial fee revenue from their normal sales of accommodation, parking and other services (including remedial English training) to overseas students. Losses of revenue of $300-$400 million over 2020-21, compared to budget expectations for the largest Go8 universities, are in store…
Since 2012, the arrangements covering the funds overseas students must bring with them before beginning their courses have been devolved to the universities themselves, with overseas students only required to bring in enough money to finance one year of study. Overseas students have also been given generous access to the Australian labour market…
Prospective applicants have to take into account the money they can make from working in Australia. They need this to pay for their fees and expenses. Work will not be as available as in the past because of the collapse of low skilled hospitality and similar work opportunities since the Covid-19 crisis began and because a huge number of residents will also be chasing similar employment.
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The authors only support government assistance on the condition that they devote more emphasis on teaching domestic students and refocus their research efforts towards Australian needs:
The universities, including the Go8, want to return to the government fold. They have gone out on their own to pursue overseas student revenue and are now left hanging.
We have some sympathy for their cause given the scale of job losses likely if they are not compensated. Their research effort is also at risk. So is the export revenue from the payment of student fees and living expenses in Australia.
Not much can be done about the export revenue at least for the next year or so. But the government can contribute to universities’ educational and research expenses.
However, if this is to occur the universities should be required to deliver educational and research activity relevant to Australian domestic students and to Australian industry needs.
We need to remember that it was the universities, and especially the Go8 that chose to put all their financial eggs in the overseas student revenue basket. When they had the opportunity to do so they also chose to ignore any responsibility to train extra domestic students and to forgo any focus on research targeted at applied issues in Australia.
If Australian universities are compensated it should be in return for major university reforms. They should devote far more of their teaching activity to the needs of domestic students and refocus their research towards Australian industry, and Australia’s social and environmental needs.
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.
