In the aftermath of the COVID-19 pandemic, Australian universities have witnessed a significant rebound in income from international education. However, the sector now faces intensified financial pressures, primarily due to escalating costs and weakened domestic demand. This precarious situation emerges just as the country prepares for changes in visa policies and the imposition of enrolment caps, which could potentially cost these institutions billions of dollars.
An analysis by Times Higher Education of the financial accounts of publicly funded universities in Australia reveals that the sector generated over A$10.7 billion (£5.5 billion) in revenue from international student fees in the past year. This figure marks a slight increase from the previous peak of A$10.6 billion in 2019, underscoring the resilience of international education as a vital income stream. Overall, the sector’s revenue reached a record A$40.8 billion in 2023, reflecting a growth of nearly A$3.3 billion compared to 2019.
Despite this revenue boost, the cost structure within the sector has undergone a significant transformation. Over the same period, expenditures surged by A$5.7 billion, driven largely by an inflationary spike that added A$2.9 billion to employee-related costs and another A$1.6 billion to various other expenses. This inflationary pressure persisted despite the austerity measures that were implemented during the pandemic, leaving many universities financially strained.
By the close of 2023, 24 of the 38 institutions analyzed were operating at a deficit, with the sector as a whole recording a modest surplus of just 0.6 percent. This marginal surplus raises concerns about the long-term financial sustainability of these institutions, particularly in the face of upcoming policy shifts.
Gwilym Croucher, Deputy Director of the University of Melbourne’s Centre for the Study of Higher Education, pointed out that while single-year deficits might not always signal a crisis—often reflecting temporary fluctuations in investment portfolios—the presence of deeper, “structural” issues in revenue streams and cost bases is a significant concern. According to Dr. Croucher, some universities are grappling with the challenge of controlling salary expenses, which have been driven up by inflation and, in some cases, by efforts to reduce workforce casualization and replace staff lost during the pandemic. For other institutions, the persistent softness in domestic demand for degrees, exacerbated by low unemployment rates, has compounded financial difficulties.
Dr. Croucher also highlighted that not all universities have benefited equally from the recovery in international student income. Before the pandemic, there was already a notable divide in the share of international revenue among universities, and this disparity has only widened post-COVID. He emphasized that it is unlikely the financial health of the sector will surpass its pre-pandemic state anytime soon.
This uneven recovery is evident in the financial reports from last year. The 14 universities that each earned over A$200 million from international education in 2019 posted an average surplus of A$35 million in 2023. These institutions succeeded in boosting revenue from both overseas enrolments and the Higher Education Loan Programme (HELP), which covers domestic students’ fees. In contrast, the remaining 24 universities experienced a decline in income from both sources compared to 2019, resulting in an average deficit of A$11 million last year, often marking their second consecutive year of deficit.
Andrew Norton, a higher education expert at the Australian National University, noted that universities with strong international student programs are performing well, while others are struggling, potentially even more than they did the previous year. He observed that the financial gap between institutions is widening, with those that are already financially strong becoming stronger, and those that are weak becoming weaker.
Professor Norton further pointed out that the 2024 funding determinations by the Department of Education revealed a concerning trend. Domestic fee revenue at nine institutions, mostly those with large international programs, had increased at nearly double the indexation rate of 7.8 percent. In contrast, domestic student contributions at another 10 universities, which typically have smaller international programs, fell short of the indexation benchmark.
These same universities have been severely impacted by recent visa policy changes, and the introduction of international enrolment caps is unlikely to have a significant impact since they are already struggling to fill available spots. Adding to their woes, they face rising compliance costs due to the proposed tertiary education commission.
Looking ahead, Professor Norton warned that job losses are inevitable, with university administrators likely to prepare for “worst-case scenarios” to prevent serious financial distress. He concluded with a grim assessment: “I don’t think there’s been a grimmer outlook.” Unlike the COVID-19 period, which saw robust domestic enrolment and government compensation, this time around, the outlook appears far bleaker, presenting perhaps the most challenging policy environment the sector has ever encountered.
