International students and the revenue they generate for Australia are undoubtedly big business. But that business is arguably based on a revenue-generating model that is over-reliant on a few of our close neighbours to fill a yawning and growing funding gap created by governments that appear to have little concern for the declining quality of education that their lack of adequate care has produced. 

The value of international student revenue to the Australian economy has become a common trope in the mainstream media. In a November 2019 press release from the former Coalition Education Minister, Dan Tehan, it was stated that Australia’s total economic benefit from its “education exports” was AUD$37.6 billion in 2018-19, making higher education the country’s third-largest export earner, second only to coal and iron ore. The three largest source nations for this economic boon were China (AUD$12.1 billion), India (AUD$5.5 billion) and Nepal (AUD$2.6 billion). Echoing these claims, Universities Australia reported that during the previous financial year, the value of international education to Australia was AUD$31.9 billion, although that figure had dropped to AUD$29 billion by the end of 2022 in the wake of COVID-19.

Given the fact that total revenue for Australia’s higher education system (HES) averaged around AUD$37 billion over the last several years (at around 2 percent of GDP), the claim that international students generate domestic economic activity that is more than 80 percent of the tertiary sector’s total revenue sounds impressive. It also implies that current policies are working well. But is this rosy narrative true?

Up until the introduction of the Higher Education Contribution Scheme (HECS, now HELP) as a central plank of the so-called “Dawkins Reforms” in 1989, the Australian federal government provided the lion’s share of tertiary education funding. In 1990, around 80 percent of the costs of running the HES were provided by the Australian Government. The remainder was sourced from a mixture of state government grants, private benefactors, commercial licences, and other non-government sources. By 2019, it was only 33.5 percent, placing Australia near the bottom of OECD rankings for public investment in tertiary education.

As the Commonwealth has reduced its funding to the HES, universities have been required to “operate like businesses” and adopt corporate models of governance, management, and administration. Because the majority of university revenues are from teaching, the obvious strategy to secure additional revenue has been to enrol more students. When caps on student enrolments were gradually lifted by the former Labor Government from 2009, this became a practical possibility. However, there were demographic limits on the number of additional domestic students that could be attracted to university, whereas the potential for growth in the overseas “student market” in south and east Asia was potentially limitless.

Successive governments preoccupied with imposing greater “user-pays” and market-driven models on the HES were clearly sympathetic to the international student marketing strategy as an alternative source of revenue growth for the HES and have actively encouraged it. State and federal governments have passed a number of pieces of enabling legislation providing university executives and senior managers with far more autonomy to aggressively pursue such opportunities through the establishment of offshore campuses and regular marketing campaigns in key countries. The official statistics suggest that both strategies have been extremely successful, at least as far as increasing international student numbers is concerned.

Over the last three decades, the total number of students in tertiary education has more than tripled, rising from around 485,000 in 1990 to almost 1,610,000 students by 2019. In 1990, there were around 25,000 international students enrolled across the country, comprising just 5.4 percent of all students. By 2019, that proportion had grown to 32.4 percent. Consequently, while the number of domestic students doubled over this thirty year period, they increased more than twenty-fold for international students. Enrolments from China alone rose twenty-fold between 2000 and 2018. Although these figures are generally lauded as indicators of the extraordinary success of Australia’s “entrepreneurial universities,” the main reason for this massive increase in the overall proportion and number of international students studying in Australia is the significant reduction in government funding for tertiary education in real terms since the early 1990s.

According to government figures compiled by the Grattan Institute, total government expenditure on higher education in 2017-18 was AUD$13.86 billion, including government research funding of AUD$3.77 billion. This is considerably less than the Australian Government has been spending on private schools since at least the early 2000s. The Federal Department of Education reported in May 2023 that recurrent funding for Catholic schools in 2023 will be AUD$9.3 billion with an additional AUD$7.4 billion dedicated to independent schools. If Australians are concerned that private school funding has increased at five times the rate of public school funding, we should be equally if not more concerned that the Federal Government continues to spend far more money supporting private schools than it does on public universities.

More than 80 percent of the fees paid by international students went to Australia’s 37 public universities, which drew between a quarter and a third of their total fee revenue from international students. The majority of those students are enrolled in the “Group of Eight” universities, most of which are in Melbourne and Sydney. In the year before COVID-19, the Universities of Sydney and Melbourne were receiving around 34 percent of their annual revenue from international students. In 2018, 40 percent of all Victorian HES students, 32 percent of ACT students, and 30 percent of all New South Wales students were international. Western Australia and South Australia both had around 26 percent, while Queensland and Tasmania had the lowest proportions of the states, at 23 percent and 20 percent, respectively. The outlier was the Northern Territory, at only 17 percent.

Although international students have undoubtedly provided a significant source of revenue for a number of universities, as we can see from these figures, that revenue has not been evenly distributed. A handful of the larger urban universities have been able to leverage their reputations and locations far more effectively than their regional and smaller counterparts. For example, Monash and UNSW have doubled their revenue from international students between 2010 and 2019, whereas most of the regional universities have not fared nearly so well.

Furthermore, and perhaps more importantly, there is now a considerable body of evidence to indicate that the Australian Bureau of Statistics (ABS) has been routinely engaging in obfuscation of the real value of international students to the Australian economy. Economist Cameron Murray has found that the ABS is including as “export income” funds which international students earn while living and working in Australia. After probing the ABS about several of its assumptions, Murray concluded that the real value of international student exports is half or less than that claimed by the ABS.

Contrary to what Universities Australia and government ministers would have us believe, therefore, we should in the future treat with extreme scepticism their claims that tertiary education is the third highest export earner for Australia. If total revenue for the HES in 2017 was AUD$38 billion, and international students paid AUD$9.3 billion in tuition fees to Australian tertiary institutions in 2017, legitimate questions can and should be asked about where exactly the other AUD$28.7 billion came from.

Dr Adam Lucas is a Senior Lecturer in the School of Humanities and Social Inquiry, University of Wollongong. His research and collaboration across academia led to the formation of Academics for Public Universities and Public Universities Australia in 2020 and 2021, both of which are public interest advocacy organisations promoting governance and financial reform of the Australian higher education system.

This article is published under a Creative Commons License and may be republished with attribution.