Foreign students’ economic contribution soars by 22%

Selling education to nearly 600,000 foreign students generated a record AU$32 billion (US$24.7 billion) for the Australian economy last year, according to the latest trade figures.

The 22% boost to the AU$26.3 billion that foreign students contributed in 2016 was the largest annual increase since 2008. Their fees and living expenses represent Australia’s third largest export, behind only iron ore and coal.

According to a report on the World Atlas website, the United States attracts 19% of global international students while the United Kingdom hosts 10%. Australia and France follow with 6% of the global total each; Germany with 5%; and Russia, Canada and Japan with 3%.

In 2005, Australia was the fifth largest destination globally for overseas students with 375,000 enrolled. This was more than 10 times the 30,000 that arrived in 1985 but that number has been dwarfed by the flood of arrivals over the past 13 years.

Reasons for popularity

Among the reasons for Australia’s popularity with foreign students is that study costs are markedly lower than in America and the UK. In addition, students can work part-time and some have access to scholarships and grants.

Students also have several options if they want work in Australia after graduating and the point system used to determine whether they are eligible for a visa is straightforward and encourages many students to stay.

But the prospect of gaining a permanent visa to remain in Australia is also a powerful attractive element for tens of thousands of students from Asia.

Acting Chief Executive of Universities Australia, Catriona Jackson, said Australia’s “openness to the world and the outstanding quality of its university education and research” had been crucial to the growth in foreign student numbers.

“International students are drawn to Australia because they know they’ll get a world-class education, global alumni networks, a great student experience and lifelong friendships with our country,” Jackson said.

She said that in the past decade, “Australia's world-class universities had added chapter after chapter to the international education success story”.

“It’s in the interests of all Australians that this continues. That’s why we need to keep investing in the quality that brings students to our shores,” Jackson said.

“The income that Australia generates from educating international students directly supports jobs, wages and living standards across our country – but it's worth so much more than dollars and cents.”

A breakdown of the record AU$32.2 billion that foreign students spend in Australia reveals that the largest proportion includes AU$31.6 billion from student tuition fees and living expenses.

Budget cuts raising risk – Moody’s

But a report by ratings agency Moody’s last January said the federal government’s planned AU$2.2 billion cut to federal higher education spending would force universities to review their growth plans and could have a negative impact on the sector’s credit profile.

In a report to investors, Moody’s said the government’s decision to end the demand-driven university funding system by freezing federal grants for two years would create a risk for university budgets.

“Whilst manageable within existing cash flow operating margins, less established universities and those currently experiencing higher growth rates will be most affected by the changes,” the Moody’s report said.

Small universities had limited means to diversify their revenue sources and a limited capacity to raise additional funds through donations as well as a lower capacity to recruit international students, the report stated.

But it also pointed to increased “revenue volatility” for established universities because of the likelihood of greater reliance on income from international students.

“Managing international student load growth will fundamentally change the underlying credit profiles across Australia’s higher education sector. While a structural shift toward higher international student loads will boost operating margins, experience has shown that international student enrolments introduce more volatility.”

Last December, the government announced that it would freeze its grants to universities at 2017 levels for the next two years before introducing a performance-based funding mechanism. This was part of an attempt to tackle rising student attrition rates and improve graduate outcomes.

Education Minister Simon Birmingham said the funding increase to universities since the introduction of Australia’s “demand-driven funding system” meant higher education had enjoyed a huge growth in university revenues and finances.

Universities Australia said at the time that the funding freeze imposed by the government was risking the financial health and sustainability of the nation’s universities and that this would also hit students and the national economy.