Are international students keeping Australian unis afloat?

Many Australian universities claim they rely on international students to subsidise domestic students and research, but does this argument stack up?

People in the higher education sector commonly blame their reliance on international student revenue on declining or inadequate government support.

They say they need international student revenue to support domestic students and fund research.

But that doesn’t tell the whole story.

This issue of universities’ financial over-reliance on international students was last in the news during the COVID-19 border closures in Australia.

Analysis conducted at that time investigating the link between government funding and international education identified additional factors at play including the rise of partly-funded research project grants, universities trying to maintain an academic workforce that both teaches and conducts research, and the growing importance of university rankings.

These factors are still present when looking at the latest funding data today.

Policy changes and varying accounting practices complicate analysis of funding trends. The broad trends are right, but year-to-year comparisons could look different depending on assumptions made.

Student funding

The average funding a university receives per Commonwealth supported student rose during the 2000s, thanks to both increased government subsidies and the amount of money students have to contribute to the cost of their education.

In fact, student contribution revenue has risen sharply over the last 30 years, more than doubling from 20 percent of all Commonwealth supported student funding in 1992 to 41 percent in 2022.

This affects students, but for university finances total revenue per Commonwealth supported place is what matters — not who pays.

Increased funding per student in the 2000s had no effect on university behaviour in the international student market.

International enrolments continued their rapid growth until demand fell in the early 2010s, following well-publicised crimes against Indian students and limits to permanent residence.

Government-commissioned studies of teaching costs find that in most courses — but not all — funding rates exceed average teaching costs.

This is a legacy of historical joint funding of teaching and research, but over time teaching and research have become funded separately.

The Morrison government’s Job-ready Graduates policy, implemented in 2021, reduced funding for some disciplines with teaching profits, which universities previously spent on research.

International student profits helped universities maintain an academic employment model no longer supported by public policy — joint teaching and research jobs.

But over the long-term, employment follows the logic of funding, with teaching-only academics the smallest but fastest-growing category of academic employment.

Lower international student profits in coming years will accelerate the growth of teaching-only academic employment.

Research funding 

As with teaching funding, counting Commonwealth government research funding is not straightforward.

The data reported here only includes specific funding for research topics or projects chosen by academics or universities. It omits government-commissioned research, worth $500 to $600 million annually in recent years and research funding mingled with teaching grants, which was more significant in the past than now.

Commonwealth research funding dipped in the 2010s before recovering.

For Commonwealth research policy, the structure of funding is also important.

Over time a higher share of Commonwealth funding has come via project grants from agencies such as the Australian Research Council and the National Health and Medical Research Council.

But these project grants do not cover their full costs. They can add more to university costs than to university revenue.

These policies gave universities an incentive to seek compensating income from elsewhere, such as international students.

Universities want to do more research

To some extent, universities have needed more money than the government gives them to meet their core domestic obligations.

But that cannot explain the scale of international education enrolments and revenues, or why both keep growing when public funding increases.

Universities grew their international enrolments because of a confluence of events — large numbers of people around the world looking to study overseas, favourable migration policies making Australia attractive — intersected with their own desire to do more research and improve their place in global university rankings.

The early 21st century was a boom time for university research.

In inflation-adjusted terms, research expenditure went from $5 billion in 2000 to nearly $14 billion in 2022.

Australia went from two top-100 universities in 2003 to six in 2023, before falling back to five in 2024.

In recent years, about $6 billion in university research expenditure has come from sources other than identifiable government or private sector research-specific funding.

While universities finance some research from investment earnings and other discretionary revenue sources, this number cannot be explained without assuming significant profits on teaching.

Universities won’t go bust after the international student boom

The argument that inadequate government funding forced universities to recruit international students is partly persuasive but cannot explain the scale of international enrolments and revenues in some Australian universities.

Universities recruited international students to fund their own missions independently of government policy, especially in research.

With fewer international students in future years, research output will fall and the trend towards teaching-only academic work will accelerate.

For universities and their staff the next few years will be painful. But it is important to keep things in perspective.

Many Australian universities will retain higher international student enrolments and greater research output than they could have imagined at the start of the 21st century.

Andrew Norton is a Professor in the Practice of Higher Education Policy at the Australian National University.

His employer, The Australian National University, will like all universities suffer a loss of students and income as a result of the migration policy and capping policies discussed.

This is the second part of a two-part series by Professor Norton looking at international students caps and university funding for 360info. You can read part one here.

Originally published under Creative Commons by 360info™.

Editors Note: In the story “University challenge” sent at: 18/09/2024 15:16.

This is a corrected repeat.