Finance and organisation of Australian higher education

Deakin University Arts and Education building

Finance and organisation of Australian higher education

By Roy Hay

Politicians love to talk about Australia as the clever country and there is no doubt that our long-term future depends more on the quality of our people than on digging up minerals and exporting them. In recent years one of our major invisible exports has been educational services. Australia educates large numbers of overseas students at all levels from schools through to universities, earning significant foreign income by doing so.

What does Australia get out of foreign students? It is not just their expenditure while they are in Australia, though this is a significant part of our income earned from overseas. Ed Byrne, Vice-Chancellor of Monash University said, ‘Tertiary education is a really important business for this country. In terms of overall wealth generation, it’s of the order of $16 to $17 billion, just under half of that directly coming into the sector.’ Monash University gets approximately 20 per cent of its income, around $350 million in money terms, from foreign students and the average for the sector as a whole is of the order of 15–20 per cent.

Nearly a quarter of all international students come from China, about one-fifth from India. Pakistan, the Philippines, Saudi Arabia and Colombia are sources of students where the numbers are increasing, but from a lower base. In universities China has over 30 per cent of enrolments of overseas students in Australia.

Foreign student income has been used to make up the short-fall in university funding since the cuts in real terms to public funding by the Howard government. Though the Rudd government reversed some of the decline, universities cannot survive on public funding alone and have to raise funds elsewhere.

The average cost of educating a tertiary student is said to be around $20 000. State and federal government pay universities only $16 000 per student and universities have to raise the balance. They do this in part by charging HECS fees, attracting research funding and commercialising their research and partly by taking in overseas students, charging them on average about $28 000 or a 40 per cent ‘profit’ on every student. Is that fair and can it be justified?

The universities say it helps us subsidise our domestic students, though it allows governments to get away with underfunding. While enrolment limits exist in certain subjects such as medicine, it is possible that fee-paying foreign students may crowd out impecunious young Australians.

There are likely to be cuts to the national education budget as a consequence of the floods, fires and cyclones. However, there are other factors at work threatening universities’ income.

The current high Australian dollar is a disincentive. ‘Parity with the US dollar is an absolute killer,’ according to Ed Byrne. Questions about the quality of education offered by some institutions have been raised. The tightening of visa restrictions, perceived incidents of violence against Indian students and the requirement to pay fees and living expenses up front have all been cited as disincentives to families sending their sons and daughters to Australia to be educated. Changes in rules governing foreign ownership of domestic property in Australia can impinge on parents who want to purchase some accommodation for their children while they are being educated here.

So there has been a decline in foreign student enrolment in universities and this has had unwelcome consequences. Monash, like some other universities, has a feeder program to ensure that international students who come to tertiary education are better prepared for what they face in terms of language and skill requirements. There was a 30 per cent fall in enrolments in that area in the second half of last year. That is almost certain to translate into a sharp fall in 2011 university enrolments and hence in income. Major staff cuts have been announced and when redundancy packages were offered there was a huge take-up. So a brain drain of academics will be one consequence of the decline in international student numbers.

Australia is also engaged in a competitive education market with the United States and the United Kingdom and other countries. If we do not offer the same or better conditions for our overseas students, they can and will go elsewhere. So getting the mix of policies right is critical for this significant contributor to our present and future.

This article appeared in the Geelong Advertiser, 18 February  2011, p. 34,  under the title ‘Brain drain hits Oz’.