AUSTRALIA: Has the export education bubble burst?

Changes to Australia's immigration rules affecting foreign students who apply for permanent residency could cause a collapse in the booming export education market. The tighter restrictions are likely to have a profound impact on the number of students from India and China whose main purpose in coming to Australia is to obtain permanent residency. Take that lure away and the main reason why tens of thousands are prepared to outlay up to $20,000 (US$16,000) every year disappears.

Estimates by the Australian Bureau of Statistics suggest that foreign students contribute more than A$15 billion a year to the national economy. But this does not take account of the money students earn working in Australia and if that sum is deducted, the total is believed to be far less.

The ease with which the students could formerly obtain permanent residency, however, has resulted in a flood of potential migrants from the two big source countries of India and China. It has also led to a massive rise in vocational education colleges offering quick-fix ways of gaining residency with recent claims of a thriving black market in forged English language test results, bogus courses and even sham marriages.

Although Australia has been in the international spotlight following a spate of attacks on Indian students in several of the state capitals, local media attention has turned to why the students are here in such numbers. Investigations have revealed a sector experiencing widespread corruption with thousands of students enrolled in colleges that have few facilities but which charge huge fees by offering fast-tracked ways of gaining a residency visa.

Migration agents in the Punjab in India, where a majority of students come from, are believed to be providing fake bank documents to meet Australian Immigration Department requirements, false results for students undertaking the International English Language Test System, and even arranged 'marriages' so aspiring immigrants can enter the country as a partner to a student who has passed the mandatory English test.

Although most attention has focused on the vocational colleges where a huge expansion in student numbers has occurred, universities are not immune to the imminent crackdown by state and federal governments alarmed at the battering Australia's education reputation is enduring.

Many of the colleges are linked to universities and provide a feeder system direct into higher education courses so that foreign students do not need to sit for an IELTS test, although they do need to reach a certain level to obtain residency.

Changes to the immigration rules last December now make it almost impossible for students undertaking hospitality and hairdressing courses in colleges to remain permanently after completing their courses. Cooks and hairdressers are no longer listed as 'critical skills' by the Immigration Department although accounting is and that means many students enrolled in university business courses can still apply for residency.

Last week, a report of an investigation by a state government agency into the financial viability of Central Queensland University warned the institution was facing a cash shortfall of $26 million over the next three years. This could leave CQU without sufficient funds some time in 2011.

The university has been described as the "most aggressive player in the degrees for visa market" but has also been severely affected by the changes to Australia's skilled migration rules. It has experienced sharp declines in foreign student numbers as Indians in particular switched to the vocational education colleges as a cheaper and faster means of gaining residency.

Last year, CQU changed its name to CQ University Australia to try capitalising on the appeal of the words "university" and "Australia" to overseas students. This did not stop a sharp fall-off in domestic student numbers and could result in federal government funding cuts as enrolments are 16% below those the government is subsidising.

In Victoria, where overseas student enrolments have increased by a startling 22% since March last year, the state government last week sent auditors along with officers from the federal education and immigration departments into 18 colleges to examine facilities and see whether the courses offered met federal guidelines.

On Thursday, in what could be the start of a series of collapses, the Melbourne International College had its education licence cancelled by the state registration authority and it was forced to close. This left 300 mostly Indian and Nepalese students without courses, although it is expected all will be relocated to other colleges in the next few weeks.

Dr Bob Birrell, a noted critic of Australia's lax immigration rules, says the Australian Immigration Department has had to cut the number of visas issued to former foreign students with cooking, hairdressing and accounting credentials.

"This is because of mounting evidence that most students did not have the skills needed for employment in their field or, for cooks and hairdressers, were not interested in employment in these trades," Birrell said.

Birrell heads the centre for population and urban research at Monash University in Melbourne and is a frequent commentator on immigration issues. He says the contraction of access to permanent entry visas will force Australia's overseas student industry to focus on training that students can utilise with profit in their home countries.