Short on time? Here are the highlights:
- Recent analysis from Australia highlights some important dimensions of risk arising from the increasing proportion of total enrolment and tuition revenue contributed by international students
- As the country’s international student population continues to grow, international educators are giving greater consideration to managing risk
In most respects, things are coming up roses for Australia’s international education sector these days. As we’ve reported on enrolment and economic impact trends in major destination countries – especially over the last three to five years – two countries have come up without fail when it comes to positive growth stories: Australia and Canada.
In Australia, education exports generated approximately AUS$30 billion in export revenues in 2017; $20.7 billion of this total was from the higher education sector alone. And numbers have increased spectacularly as well. A recent report from Australia’s Analysis & Policy Observatory (APO) observes that,
“Between 2012 and 2016 the number of commencing overseas students in Australian universities increased from 85,497 to 124,150. As a result, the share of commencing overseas students to all commencing students increased from 21.8% in 2012 to 26.7% in 2016.”
APO calls this a “remarkable record,” but their report underlines the dangers of Australian universities’ growing reliance on international students. APO illustrates the extent of this by noting the following facts about four of the country’s “Group of Eight” (Go8) universities:
- At the University of Sydney, the proportion of international students enrolling for the first time at the university increased from 23% of all commencing students to 39% in 2016;
- At the University of NSW, the proportion of international commencements was also 39% in 2016;
- And at the University of Melbourne and Monash University, roughly 36% of commencing students were international.
Collectively, Go8 universities – the group of eight Australian universities that consistently place highly in international rankings and charge much higher fees than other Australian universities – recorded a massive 56% increase in the number of international students they hosted. Most of this increase was attributable to Chinese students willing to pay annual fees of AUS$40,000 and upwards among Go8 universities.
Outside of Go8 universities, fees are lower and a greater proportion of the international student population comes from South Asia, and from India in particular. International student commencements in this second group of universities rose by 41% from 2012 to 2016.
Suffice to say that Australian universities have grown significantly more reliant on international students for enrolments – and thus revenues.
A context of budgetary struggles
The exposure to risk entailed by a growing dependency on international student tuition is highlighted by the recent news that the average operating surplus reported by Australia’s universities fell below 5% in 2017. A surplus of 5% is considered to be the minimum needed to ensure that universities have sufficient reserves for maintenance and capital replacement costs.
The Tertiary Education Quality and Standards Agency’s Key Financial Metrics report found that Australian universities’ surpluses fell from 5.5% in 2016 to 4.8% in 2017, and that surpluses were even lower beyond the universities-only sector: an average of 4.1%.
At one third of Australian higher education institutions last year, expenses exceeded revenues, despite education exports rising by AUS$1 billion over 2016. Staffing costs rose by AUS$1.1 billion in 2017, and marketing and promotion expenses also increased.
It’s not hard to imagine how much worse the situation would be if international student numbers were to fall in the higher education sector. In essence, the APO report identifies two significant aspects of risk:
- The extent to which Go8 universities rely on international tuition as a proportion of overall revenue, making them vulnerable to revenue shortfalls that would arise from any disruption in key sending markets.
- The extent to which universities outside the Go8 rely on Australia’s relatively open post-study work rights for foreign graduates, making them vulnerable to any change in government policy in this respect.
A strong record of recruiting success
The news about growing risk exposure as a result of burgeoning international student populations must be balanced by the reality that Australia is at a high point in terms of its attractiveness to international students. The country may become even more compelling to Chinese students should tensions between China and the US continue to escalate as they have this year. In one notable expression of this tension, the US State Department recently reduced the length of visas granted to Chinese graduate students in certain fields.
By contrast, all international students graduating with Australian higher education degrees are eligible for a work-study visa that allows them to work for at least two years in the country. This visa provision is particularly attractive for students coming from India, a country that represents Australia’s second most important sending market.
Australia’s higher education system also offers an impressive range of options for international students with differing priorities. Its highly ranked – and more expensive – universities are a major draw for Chinese students, who in general are less price-sensitive than students from South Asia. And as noted, its work-study visas are a big draw for students coming from India and the surrounding region.
For additional background, please see: