How to Kill an Export “Industry”

Brian Stoddart explores the Australian government's attacks on its higher education sector's position in the international student market.

Australia’s meandering federal government is taking The Thick of It’s Malcolm Tucker “carrot and stick” approach to what has for the past thirty years or so been among the country’s top four export income earners – the international student market.

Figures inevitably vary but the Australian higher education sector suggests the annual financial impact of education export services is around $A48 billion dollars. One illustration of the scale involves tuition fees paid by international students to the Group of Eight made up of the “sandstones” - the initial institutions like the University of Sydney and more recent behemoths like Monash and the University of New South Wales. Sydney demonstrates this clearly – in 2023 it reported collecting $A1.8 billion in fees alone. In the space of perhaps twenty years, that one institution has gone from having almost no international students to now being around forty five percent budget dependent on them.

The national spread of international students has always been uneven with Sydney, Melbourne and Brisbane the perennial main targets, Adelaide and Perth secondary destinations at best, and regional and remote institutions struggling with a few notable past exceptions where organisations like Central Queensland University developed alternative delivery methods and locations via branch campuses, sometimes disquieting government and regulatory bodies.

For this story, the “industry” (education services export) contains three main components. First, the publicly funded universities which also include private institutions like the Australian Catholic University, Notre Dame University Australia and Bond University. This group receives most international students. The second group includes independent, private and for-profit higher education providers tending to specialise in specific fields like business and commerce and niche markets like music and media production.

Since 2011 the Tertiary Education Quality and Standards Authority (TEQSA) has regulated these two groups, members of the second able to apply for upgrading to university college or university status.

The third group includes the Technical and Further Education (TAFE) system and registered training organisations focusing on vocational education and training. These are regulated by the Australian Quality and Skills Authority.

That market profile backgrounds the federal Labor government’s approach to curbing what it regards as runaway market growth impacting too strongly on other areas of national policy and development. COVID severely affected the market, but the post-pandemic market recovery was unprecedented, unexpected, and surpassed pre-2019 trends. It also produced a new twist, the waves of new students targeting even more strongly the Group of Eight and especially the “big five” of Sydney, Queensland, New South Wales, Melbourne and Monash which all experienced exponential growth, symbolised by massively increased capital and infrastructure development on their campuses.

In response this government began imposing higher language and financial requirements on international students, doubled their visa costs to become world’s highest, reduced work rights and contemplated tougher restrictions on recruitment agencies.

Over the years, the higher and further education sector itself emphasised the importance of international students to the national economy, but it was often missed in wider media, business and commercial spheres, official export income tables frequently overlooking education export services. That lack of recognition and broader misunderstanding of the enterprise led, as elsewhere globally, to sporadic outbursts of misinformed criticism including the idea domestic students were displaced by these foreign interlopers, that standards were dropping, marking softer and admission requirements lower, all in a chase for revenue.

In reply, the sector argued that inadequate government funding for higher education caused the reliance on international income to cover operational costs as well as stimulate growth, research and international standings (the pernicious ranking systems are a main driver in all this). This is an important strand. Over endless years, successive governments claimed to adequately fund higher and further education while the institutions and their lobby groups cried poor. That debate is perennial, skewed increasingly by the rivers of international money.

But if export education is so economically significant, why is the government attacking it? An immediate response is that the policy changes are driven as much if not more by broader immigration, economic and electoral politics issues than higher education itself. And in that context, it must be said both main Australian political tribes – Labor and the Liberal/National coalition – hate the higher education sector, and that has flowed through to public opinion. As a result, the sector has little or no political traction.

As an example, Vice-Chancellor salary levels continue to draw massive negative commentary. Most if not all those levels now exceed $1 million per annum, sparking drearily predictable comparisons with the Prime Minister’s salary. Of course, that conveniently overlooks the fact most if not all CEOs of comparable organisations are paid even more. That dissatisfaction is boosted constantly by stories about alleged contract cheating with international students said to be heavily involved. Whenever these stories appear in the newspapers, comments sections invariably see pro-university comments enormously outweighed by negative ones.

So there is public sympathy for the government’s approach which, put simply, is to choke off foreign student flow into Australia. Some universities in that first provider group will be harder hit than others via the complex algorithm being applied. Student number growth between 2019 and 2023 is calculated for each institution, and if the Department of Education boffins consider that growth excessive then starting numbers (that is, new recruits) for 2025 are scaled back.

Most institutions are wary of going public yet but some will sustain significant reductions while others enjoy significant growth, and with little apparent logic underlying the distribution patterns. Federation University, a regional institution based in Ballarat, appears to have had a fifty two percent reduction in the numbers of 2025 new start international students while Sydney University has a mere five percent reduction. Given their reductions the University of New South Wales might lose $A50 million in 2025 and Murdoch University across in Perth the same. Conversely, Notre Dame University of Australia sees a one hundred and forty percent rise and the University of the Sunshine Coast one hundred and eight.

These are major shifts if original growth predictions were hardwired into forecast budgets, and have prompted dire forecasts about institutional sustainability.

Independent providers and the technical and further training sector are hit even harder, a plethora of organisations envisaging substantial job losses, course delivery disruption, financial losses and even closures. Underlining the severity of the proposals, some newly registered organisations supported heavily by industry groups have reportedly been advised of a zero international student allocation. Another significant provider has been allocated just fifteen percent of the formerly approved international student load.

Many of these for-profit providers have invested heavily in meeting increasingly stringent regulatory requirements, developing infrastructure, people, intellectual property, student welfare and services and related areas. For some and perhaps many, an arbitrary judgement based on obscure calculations, some delivered electronically at midnight on a Friday, have turned much of that investment to rubble. An earlier government action is relevant here, too. Immigration authorities began slowing visa processing of international student applications. That immediately flowed through into 2024 arrival numbers this year that fell below forecast levels, so many organisations were already feeling the strain financially.

The private provider group has also been dealt with harshly. Their 2023 numbers have been assessed, and on the basis of that informed their 2025 start numbers will be one third lower than that calculated number. All these providers outside the university sector already have had to negotiate international student load maximums with government but most if not all those are now being undercut, again with significant financial impact.

Again, in doing all this government is prompted by a complex mix of politics, immigration, housing, populism, envy, anti-intellectualism and electoral prospects.

Because the sector as a whole has rarely raised a united voice, trying hard to do so now comes rather too late. The Group of Eight is leading the way, “vehemently” opposing the “caps,” as they are known, on the grounds they are destructive and will lead to Australian universities falling in global rankings. (Therein a debate for another day on whether or not that outcome is one to be really bothered about). Most other institutions and groups in the university sector are agreed, with a few like the University of New England (UNE) trying to find positives.

That indirectly goes to some of the (alleged) logic that informs the government’s onslaught. One claim saw slashing enrolments in leading institutions and major urban centres encouraging unsuccessful international applicants to switch their bids to rural and regional institutions like UNE. That idea emanated from Canberra, apparently uninformed by any sector expertise. Most international education people make this obvious point: any candidate unsuccessfully targeting an Australian “premium” institution will then aim for a similar one in the USA, UK or Canada rather than for a “lower level” Australian institution. That is just another pernicious result of an aggravated global ranking system.

Innumerable consultations and national parliamentary inquiries have canvassed these student caps and related measures contained in the proposed changes to the Education Services for Overseas Students Acy 2000 (ESOS). One notable feature is the prominent even dominant presence of and presentations by the key implementing public service departments, effectively prosecuting the government’s case with the industry trying to fend off change. Again, some of these presentations, like the above prediction about student choice, raise questions about the depth of modelling or industry insight utilised. At least one prominent official seems to have been in education for a brief time, following a mixed background in the private commercial sector and other public service policy areas.

Primarily, this sustained government attack continues its “war on shonks,” with “shonk” translated as “providers whose services are deemed to be below acceptable standard.” Theoretically, dealing with that is the regulators preserve but government memories are long, recalling previously poor policy initiatives when privatisation of vocational, technical and further education led to approximately $A2 billion being siphoned from the system.

Deepening costs of living and housing crises in Australia provide yet another opportunity for government to attack the sector. With little or no conclusive evidence, it argues that increasing international student numbers impose further pressure on property rental and sales prices, so by definition add to local costs and make housing unaffordable for locals.

That ignores the fact the private sector has been developing tailormade student housing  for some years, absorbing much of the pressure and in itself becoming a major spinoff from the international market. During 2023, for example, private equity giant Blackstone paid $A500 million for Student One in Brisbane, a three-building and 2300 bed capacity plus management company.

That accommodation wedge also plays to political conditions in which both major sides of politics (neither being fans of higher education, remember) are scrambling for position in the runup to an imminent election. Foreign students become an easy link into the immigration arena that is already highly charged. The argument that international students are the major cause of an immigration burden is both abiding and persistent.

The rest of the world has seen that, too. A new right wing administration in the Netherlands forced universities to cease teaching in English, a clear hit on international students. In Britain, international student numbers were always counted inside the immigration “bubble” so any call to reduce numbers saw those students caught up in cuts. That was never formally the case in Australia but effectively is now,  and a political agenda in key electoral battlegrounds. At best, it was a struggle for political advantage and at worst simply racist.

China being a major contributor of international students added yet another element to this storm. The previous Liberal-National conservative government led lastly by Scott Morrison became a leading American ally in the so-called struggle with China, taking a noticeably belligerent line and consequently suffering substantive trade deficits. Chinese student numbers helped offset that but  allegations of Chinese authorities interfering in Australian university processes saw university to university research alliances with China become subject to foreign interference legislation amidst allegations of cyber spying and warfare.

It was simply a matter of time before Chinese student numbers in Australia were targeted by government, and that continued under Labor even if it was less dogmatic than its predecessor. And the idea that this visa dimension was politically loaded stood confirmed when popular new ally India popped into the picture. Never mind that Indian authorities had interfered with Australian university processes. A new visa class was created to specifically allow skilled Indians into Australia at the same time Chinese ones were being turned away.

As part of that, government is actively encouraging Australian institutions to set up shop in India itself, several of them in Narendra Modi’s home state of Gujarat where they will compete for students among themselves and with other foreign institutions. There seems to be no question by government about how those Australian institutions are funding such initiatives, even though financial and regulatory conditions in India are vastly different.

And that is without referencing the idea of governance and oversight. Yet another government move following the massive University Accords review process was the mooted and planned creation of the Australian Tertiary Education Commission. The sector welcomed this as a move towards independence but there are serious questions about what it will do and how independent it might be. At first there was a thought that TEQSA and main research funding agency the Australia Research Council would be incorporated but that evaporated, rightly, on the grounds of independence. And another Accords initiative, an all-powerful Student Ombudsman, will be located in the broader Ombudsman framework. What is left for the new Commission (apart from another expensive bureaucratic layer) seems to be general policy and strategy, but Education Department officials make it clear they expect to retain major policy oversight while Treasury will undoubtedly grip the purse strings even more tightly.

As the sector heads towards the new year, then, recruiting for 2025 seems already compromised, and if government holds firm that will remain true for 2026 and beyond.

It is appropriate, then, to finish on a stunning new announcement. Former Labor minister and wannabe Prime Minister Bill Shorten is to leave parliament and become Vice-Chancellor at the financially stricken University of Canberra. A career politician who came up through the union ranks to be leader of the opposition, his claims on this new position remain wonderfully unclear and he goes to the position (and its $A1 million plus salary) having been tacitly a part of this Labor attack on the system.

Stand by for more turbulence.

Thanks to Kerrie Hutchinson for comments on this piece.

Photo by RDNE Stock project