More proof international student ‘exports’ are wildly exaggerated

The Reserve Bank of Australia (RBA) has released a Bulletin Article examining the impact of the COVID-19 pandemic on Australia’s international student trade.

The RBA perpetuates the myth that education is Australia’s fourth largest export, earning $40 billion in 2019:

Australia’s education exports totalled $40 billion in 2019. This included $17 billion in tuition fees paid by international students and $23 billion in international students’ living expenses while they studied in Australia. China has accounted for one third of Australia’s education exports over the past few years (Graph 2)…

Growth in education exports to China eased somewhat between 2017 and 2019, which liaison contacts partly attribute to increased competition for international students from other English-speaking countries, such as the United Kingdom and Canada. Meanwhile, the number of international students from South Asia, particularly India and Nepal, has increased strongly from a lower base. Liaison contacts note that South Asian students have found Australia’s post-study work arrangements appealing; over 40 per cent of all temporary graduate visas granted in 2019 were to Indian or Nepalese graduates (Graph 3)…

Australia’s education exports have fallen further in the second half of the year. The number of international student enrolments has declined, driven by a much smaller midyear intake than usual…

However, the RBA then inadvertently contradicts itself by noting that most international students – especially those from the booming Indian and Nepalese markets – work in Australia to pay their expenses:

Liaison contacts have also been concerned that the economic effects of the virus in many South Asian countries (particularly India) could require students to look for cheaper alternatives.[7] Labour market conditions in Australia will also be a key consideration for these students. Census data indicate that over three quarters of Indian and Nepalese holders of student visas were in the Australian labour force in 2016 (Graph 9). Therefore, a lack of part-time work opportunities in Australia – in line with broader spare capacity in Australia’s labour market – could weigh on demand for education exports. The availability of graduate job opportunities will be a consideration for students intending to work in Australia after completing their studies.

Earth to the RBA: money spent in Australia earned via working here is not an export. Yet it is treated as such in the above analysis, which counted education exports as “$17 billion in tuition fees paid by international students and $23 billion in international students’ living expenses while they studied in Australia”.

Indeed, it is no more an ‘export’ than expenditure by domestic students paid for via income earned through paid employment.

Professor Salvatore Babones’ picked up on this creative accounting in his excellent research paper last year for the CIS:

International students are clearly important for Australia’s universities, but their importance to the economy as a whole is frequently overstated. One oft-quoted statistic is that educational exports have risen to become Australia’s third-largest export after iron and coal. That doesn’t really capture the full story, since exports in different sectors are reported at different levels of granularity.

Figure 5 compares the size of Australia’s educational exports to that of other major sectors from across the economy, using data from the Australian Bureau of Statistics (ABS). Additional historical data going back to 2002 are reported in Table 5 in the Appendix. Educational exports overtook receipts from all other travel (tourism, family, and business combined) in 2008, but are still smaller than Australia’s exports of agricultural or manufactured goods. Moreover, more than half of Australia’s reported educational exports (53.7% in higher education and 57.2% for the education sector as a whole) consists not of student fees, but of goods and services bought by students while in Australia. Since this spending is at least partly generated by income that students earn from working in Australia while studying, the true net value of education exports to the Australian economy is likely lower than the headline figures reported by the ABS and DET…

Another dead giveaway that this ‘export’ figure is exaggerated was the huge number of international students left destitute and seeking charity when they lost their jobs at the commencement of the COVID-19 pandemic. Many international students can only meet their expenses via paid employment in Australia, which by definition is not an export.

Clearly, financial requirements for international students need to be lifted substantially so they can support themselves throughout their courses and are not dependent on working to pay their bills.

Lifting the financial requirements of international students would have four positive impacts.

First, it would reduce competition in the workplace, thereby providing more job opportunities for young Australians during this period of high unemployment.

Second, it would dramatically reduce workplace exploitation, since international students would not need to take on illegal work.

Third, it would maximise export revenues per student, given tuition fees and living expenses would be paid for by funds from abroad, rather than from money earned in Australia.

Finally, it would lift the quality of student, since most would come to Australia for the primary purpose of studying, rather than to gain backdoor working rights with the hope of transitioning to permanent residency.

Obviously, our rent-seeking education industry would oppose any move to lift international student financial requirements, since it would make gaining a visa more difficult and stem the flow of fees.

It is far easier for the industry to lower the entry bar and privatise the extra tuition fees, while socialising the costs onto the Australian taxpayer.

Sadly, the creative accounting and propaganda surrounding education exports plays straight into the education industry’s hands by inflating its worth.

Unconventional Economist
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Comments

  1. Hernando da Silva

    Personally I’m all for young Australians being forced into poverty because of wage competition with overseas “students”.

    This dose of harsh reality might temper their “wokeness”.

    • I find Wokeness is such an interesting problem.
      those that logically should oppose it (from an economic rationalist perspective) are generally the most woke
      the greater the adversity resulting from our woke economy, the more woke they become.
      I guess in many ways Woke has become a modern religion whereby the beliefs of the participants is reinforced by every negative externality.
      Our young are becoming martyrs of wokeness, they’re dying on its cross or maybe they’re just dying in its crosshairs, I guess your perspective on this depends on who you believe controls this global woke agenda

      • Why would you want that?
        I find today’s woke so incredibly easy to manipulate, it’s like their brains have already been removed, they just do what they’re told.
        All gives you some insight into what it must have been like to be a Catholic Priest 50 years ago.
        Compliant choir boys and bobbing their heads in perfect synchronization, it’s a Pellian dream world but even he realised that in today’s crass commercial world it’s all about the finances.

        • Oh they are being manipulated alright.
          They lack critical/clear thinking.
          Are hooked on displaying virtue signaling behaviors.
          Are dangerously ignorant, narcissistic an entitled.
          Make their decisions based on emotions, self-interest and envy of those that have more than them.
          At least in Australia, the vast majority of them are too cowardly to put any real skin in the game.

    • PalimpsestMEMBER

      Except that it’s the pro business lobby that has been pushing the argument that economic growth is dependent on cheap labour and immigration. So the average punter having a difficult time will push harder for immigration, in theory. Instead of a diagnosis of “woke” try a diagnosis of business propaganda and you’ll find a solution. Although it makes it harder to feel smug.

  2. Exactly Leith. The only economic dividend of foreign students is the cheap services their cut-price labour underpins. Try getting a hamburger delivered for $4 when the rider’s paid minimum wage.

  3. Agree but they haven’t included the bribes and kickbacks paid to university academics, professors and board members and also to international student processing company agents and councillors.

  4. Hernando da Silva

    Our universities are pretty sick anyway. Last year they spent our tax research dollars on:
    – $271,000 on Gender equity in jazz
    – $247,000 – Australian boys: The boy problem
    – $600,000 on adapting “an international model of microaggressions”
    – $440,000 will be spent on “seeing the black child”

  5. The RBA stats don’t account for any undeclared work performed by international students. Wait….what am I thinking ? Perish the thought that these students would lie in order to work more hours than legal , earn untaxed income or participate in illegal work practices in the black economy.

    They’re obviously all exploited victims of predatory Caucasian capitalism etc etc

  6. What about the $10B sent overseas each year by immigrants? (Yes that’s nearly as much as we could loose in the China trade blockade). is this deducted in the government calculations on the economic benefits of student immigration? (though I suspect they don’t actually do these sort of calculations)

    • PalimpsestMEMBER

      I remember referring to the ABC article on the poor students unable to find work, and it noted how they weren’t able to send money home to the family. I haven’t seen an authoritative figure though.

    • run to the hillsMEMBER

      A $hitload. I know a “student” here in Sydney from a SE Asian country who funds herself turning tricks for the fellas. As of last Sunday her gross earnings for 2020 were $431,000, I kid you not. No tax paid on that of course. The Asian hookers working online in Sydney have absolutely killed it in COVID as there has been no fresh girls arriving in town to compete all year. Any girl with a stable of regular Johns would have made a fortune in 2020. The girl I know sends every single cent back home to the family after covering rent and costs.

  7. adelaide_economistMEMBER

    As expected, a significant Chinese cohort (as a share of the total) that doesn’t work due to CCP-linked mummy and daddy’s money, and then a hefty share of the others (and in absolute terms, Chinese) who are here as either a chance to leverage off our relatively high wages and/or a play for residency. Yet still our official bodies, education institutions and media continue with the big lie.

    The actual impact of covid19 on ‘Australia’ (such as it is) from the perspective of international student contribution lost is a mere fraction of what it is supposed to be according to the lies about the ‘contribution’ they make to the country.

    I almost cleaned one of these food delivery specialists up tonight in the car after he pulled out from the kerb without giving way then continued in a straight line on a congested dual lane road as it curved – must have missed him by centimetres. Naturally the ‘solution’ to this in the media is paying them full JobSeeker benefits. 2020, eh?

    • John Howards Bowling Coach

      Their inability to follow road rules is in direct reference to the chaos theory used in their home nations to find their way around in the mess of humanity.
      Back to the economic stupidity of paying Australia social welfare payment to a a few hundred thousand who are here to earn often illegal wages to remit home, the mind boggles at the stupidity of that reality. Us the Australian people funding their remittances directly, and through taking on more massive debt to do it? Albeit we are already doing that indirectly through the massive infrastructure costs of hosting hundreds of thousands of additional humans in our cities, in order to boost their lifestyle and that of their families back home.
      You’d laugh at the suggestion if the reality of it wasn’t so starkly factual, in truth it should be bringing the Australian public to tears, but for the fact that mass immigration is rendering the Australian people a minority