Universities are economic growth engines, not cost centres

We have long been an advocate for Australian international education. It is ambitious, collaborative, innovative and nimble, something that differentiates Australia in the market.

Institutions ‘down under’ are often the first to break new ground, as we have seen with transnational branch campuses in Indonesia and India. They are not afraid to go off the beaten path when it comes to recruitment and have pioneered destination-based marketing, with all Australian states having an overseas presence in some shape or form.

Since last year, Australia has prioritised strengthening educational ties with Southeast Asia in its inaugural strategy focused on the region. The plan, unveiled by Prime Minister Anthony Albanese at the ASEAN Indo-Pacific Forum in Indonesia, outlined how Australia deepens its connections with its northern neighbours as many Southeast Asian economies experience robust growth.

The influence of IDP

This is in no small part down to the fact that international education organisation IDP Education Ltd, to a certain extent, drove the internationalisation of Australian education.

Owned in part by the universities themselves, it began life as an Australian members’ club which provided a single-focused approach to expanding international student recruitment for the sector. It has since transformed into a vehicle for the growth in global student mobility.

The history of IDP shows how Australia started its quest to internationalise with universities working together. As more universities were created, they joined IDP, which, due to increasing international student recruitment to Australia, had capital to spend to expand and invest in ‘brand Australia’.

During the pandemic, the sale of IDP shares probably rescued several universities, when in August 2021 each of the 38 university partners in Education Australia were handed a windfall of AU$54 million (US$36 million) in stock in IDP Education after the sale of 15% of their stake for AU$1.14 billion.

Each university received about 1.84 million shares in IDP Education, trading at AU$29.24 at the time of allocation. The value of those shares at the time was in the region of AU$3.5 billion, with IDP Education valued at AU$8.14 billion and its shares trading at just under AU$30, in contrast to today’s share price of around AU$15.

‘Bad apples’

No other country had a coordinated start like that or subsequent windfall. That said, one could make the point that the substantial increases in international students studying in Australia have ended up being ‘too much of a good thing’ with a small number of ‘bad apples souring the bunch’.

Burgeoning private language and business colleges in Melbourne and Sydney, colleges and universities poaching students from each other, students transferring from university degree programmes to vocational studies to expedite their ability to join the workforce and increasing numbers of students transferring their visa to alternative visas while remaining in Australia have culminated in a government ‘clampdown’ on Australian international education.

This kicked off with the Universities Accord, published earlier this year when eyebrows were raised at the mention of an international student levy. Since then, various enquiries and consultations have resulted in a far more hostile environment for international students looking to study in Australia.

The most worrying aspect of this is an international student cap, the details of which are yet to be announced. In addition, visa fees have been more than doubled for international students, making Australia the most expensive study visa in the world and the government has put an end to onshore visa transfers.

This means that students who travel to Australia to improve their English and, on successful completion of their language course, would transfer to a higher education institution, will no longer be allowed to do so and will instead have to return home to apply for a student visa. This has already had a significant impact on applications to Australian universities from South America, particularly Colombia.

Post-pandemic headwinds

In addition to government policy, the sector is facing significant headwinds post-pandemic, the most financially challenging of which is the shift from students doing an undergraduate degree overseas which would result in four years of tuition fees, to postgraduate programmes yielding just two years’ fees.

As competition hots up in the international student recruitment space, with stiff competition from other countries, IDP’s legacy universities are increasingly relying on agents to recruit the majority of their overseas cohort. Three quarters of students studying in Australia are recruited through agents.

Increasing commission rates and additional marketing allowances are further eroding the yield per international student.

This follows a pandemic when fortress Australia was pretty much locked down with no-one let in or out. That resulted in significant sector lay-offs and consolidation, from which the sector has not fully recovered despite the increase in international students studying in Australia and the IDP share windfall.

All of this has resulted in a sector, which was already operating under significant pressure, reeling from government policy changes which could end up ‘killing the goose that laid the golden egg’!

International education was worth AU$47.6 billion (US$31.6 billion) to the Australian economy in 2023, according to the Australian Bureau of Statistics.

By capping international student numbers, increasing visa fees and making it increasingly difficult for international students to study in Australia, the economic benefit from international education to the Australian economy could reduce significantly as well as deprive the economy of much-needed labour provided by international students working part time during their studies and joining the labour force post-graduation.

In a higher education sector experiencing such headwinds, there have been some significant moves in leadership within Australian universities as vice-chancellors consider their balance sheets.

So, what is the solution to an increasingly challenging environment that is likely to become even worse if there is a change in administration following the Australian election, due to be held before September 2025?

For the solution I will defer to Andrew Barkla, formally IDP’s CEO, who presided over the company during a period of unprecedented growth.

Interviewed by The PIE at the Australian International Education Conference back in 2017, Barkla said: “The opportunity I see is positioning career opportunities in source countries. There are major MNCs [multinational corporations] developing very quickly in source countries for international students and then helping them connect to destination markets, where we place students with internships and study experiences, ultimately … to pursue a career if they go back to their source countries.”

Universities as economic growth engines

We have long felt that how universities are funded needs to change. It is highly unlikely that any more funding will be forthcoming from the government, with many demands on the public purse and higher education at the bottom of the list when it comes to priorities.

It is hard to argue that compulsory education and health should not be prioritised over higher education post-pandemic, with universities having received that windfall in overseas revenue over the last three years.

What if, as Barkla suggests, we shifted the narrative? Far too often students are referred to by the public, government and even universities themselves as a cost – the cost of teaching them.

We could instead see students as a university ‘asset’, not a cost. If universities are to fulfil their social contract, there should be a direct link between those graduating from university progressing into employment, raising productivity and therefore driving economic growth.

In truth, universities should be seen as economic growth engines, not education cost centres. If universities were funded differently and students were considered an asset not a cost, huge revenue opportunities could open up to work more closely with industry to provide not only a talent pipeline of capable, skilled students to drive economic growth, but also additional revenue streams in the form of applied research, continuing professional development and opportunities for lifelong learning and skills development of the existing workforce.

While the future looks bleak if you are working in Australian tertiary education right now, a change in mindset could see a very bright light at the end of what is presently a dark tunnel.

Louise Nicol is founder of alsocan and Asia Careers Group SDN BHD.

This article is a commentary. Commentary articles are the opinion of the author and do not necessarily reflect the views of University World News.