Modest decline in international earnings ‘would double deficits’

A moderate decline in international earnings would push Australia’s university sector closer to the breadline, almost doubling the number of institutions in deficit and jeopardising regional and suburban delivery.

An analysis of the accounts of the country’s publicly funded universities has found that a 20 per cent reduction in revenue from overseas students’ fees would land hard even on institutions without large international operations.

Data analyst Mark Rahimi said an uneven post-pandemic recovery had further concentrated foreign earnings among the five richest institutions, leaving “substantially thinner” financial margins elsewhere. “The Australian university system as a whole is not necessarily financially fragile but there is considerable variation between institutions,” said Rahimi, a senior research fellow with the University of Melbourne’s Centre for the Study of Higher Education.

“Some universities have substantial financial buffers, while others are operating close to break-even or…already in deficit. The same revenue shock can have quite different consequences across institutions.”

It is not merely an academic observation, as international education braces for a downturn for multiple reasons. Visa issuances to would-be university students applying from China – easily Australia’s biggest student source country, providing about 35 per cent of some universities’ total earnings – declined 23 per cent last financial year, amid plummeting Chinese demand for Western degrees.

Demand elsewhere is also vulnerable to rising costs, currency exchange rates and general scepticism about the value of degrees in an artificial intelligence boom. Meanwhile, there are signs that the federal government could add to the 25 measures it has imposed to further dampen demand since mid-2023 – including tightened visa eligibility, triaging of visa applications and successive increases in visa fees – amid a resurgence of student-related scams and broader political concerns about the scale of migration.

The government has set a “national planning level” of 161,725 visas for public university students next year, with visa processing to slow down for institutions that approach or exceed their share of places. There is also speculation that the latest changes to migration settings, expected soon, could include restrictions on students bringing their dependents into Australia.

Rahimi said his modelling was a “static sensitivity analysis” rather than a forecast, with the gravity of any downturn very difficult to predict. But a hypothetical 20 per cent decrease in international student earnings would leave 23 universities in deficit, up from last year’s tally of 12.

The institutions thrust into the red would include the universities of Melbourne and Sydney, both of which earned well over A$1 billion (£522 million) from international tuition fees last year. But they would also include the universities of Southern Queensland and Notre Dame Australia, where international students contribute less than A$50 million a year and comprise roughly one in 10 enrolments – compared with roughly half in Sydney and Melbourne.

Other institutions shunted into deficit would include regional Central Queensland and Southern Cross universities and suburban-based Deakin, Flinders, Macquarie and Swinburne, along with inner Melbourne’s RMIT. Although some of these institutions are big international education earners, most derive less than the sector average of 29 per cent of revenue from this source.

Rahimi said that if universities were able to offset a quarter of their lost international income by reducing their expenses, nine institutions would still move into deficit. If they managed to defray half the losses, three would fall into the red.

He said that if a downturn in universities’ international education revenue could be “clearly linked” to policy changes, there could be a case for “targeted and time-limited transitional support” from the government. “But I would distinguish between supporting…public purposes and replacing an institution’s lost international fee revenue,” he stressed. “The first is much easier to justify than the second.”

john.ross@timeshighereducation.com