Our reliance on foreign students is at crisis point

The addiction of Australia’s universities — particularly its major ones — to revenue from foreign students is creating an array of problems that make it unsustainable for the economy, for our security, for taxpayers and for universities themselves.

A new report from the Centre for Independent Studies — that’s like the Institute of Public Affairs, but with credibility — strongly makes the case that universities are now at serious risk from any shock to the flow of Chinese students into Australian universities. The report, by Salvatore Babones, details the extraordinary dependence of major universities on foreign students, the ways in which academic standards have been systematically lowered to accommodate it, and the threat that such dependence poses to those institutions.

Australia is, per capita, easily the world leader in educating foreign students: our number of foreign students per capita is more than twice that of the second-highest country, the UK. International students make up more than 25% of all enrolments at Australian universities, but ten universities, including most of the major institutions, have between 35-40% of enrolments from overseas. They are particularly dependent on Chinese students — at more than 10% of all enrolments, Chinese students form a much higher level of enrolments here than anywhere else. The specific location of our addiction is business schools, where at five major universities more than 40% — and in two cases closer to 70% — of enrolments are of foreign students.

Babones demonstrates how, to facilitate this, major institutions not merely waive basic English language requirements but actually turn the lack of English language skills on the part of foreign students into a money-making opportunity. They charge tens of thousands of dollars for enrolment in English language courses offered by university-linked, private providers that mean students are never required to meet enrolment standards. They have also lowered their academic standards: the University of Sydney accepts Chinese students with low Chinese domestic examination scores, using the same scores at middling regional universities elsewhere.

Babones argues against the claim put forward by some of us, and by universities themselves, that this dependence has been driven by lack of government funding. In fact, he shows, universities have dramatically increased their reliance on foreign students at a time when student-related government funding was increasing — a view backed by Grattan Institute’s Andrew Norton and Ittima Cherastidtham last year, although they pointed out research funding has fallen in recent years. Universities have dramatically increased revenue over the last decade, and generated sizeable profits during that period.

This heavy dependence on Chinese students, Babones argues, means our biggest institutions are exposed to major financial risk via either an economic or political shock that significantly reduces the number of Chinese students coming to Australia.

He notes their efforts to diversify by trying to source students from India, but argues that India cannot even begin to match the revenue available from Chinese students — and universities would have to further lower their standards to attract it. As a result:

At these levels of exposure, even small percentage declines in Chinese student numbers could induce significant financial hardship as universities struggle to meet the fixed costs of infrastructure and permanent staff salaries in the midst of a revenue shortfall. Large percentage declines could be catastrophic.

The risks identified by Babones are only one sub-set of the problems created by our dependence on foreign students. The nearly-five hundred thousand foreign students currently in Australia provide a rich resource for employers to exploit, with wage theft and other forms of exploitation rampant among industries that rely on visa holders, such as hospitality and retail. This in turn provides downward pressure on wages for others workers, adding to wage stagnation, and harms the image of Australia in the eyes of exploited students and their families.

The growth in foreign student numbers also makes a mockery of government claims that it is reducing permanent migration to reduce pressure on infrastructure in Sydney and Melbourne: instead, the rapid rise in student numbers has added to congestion on key transport routes and put further pressure on urban housing markets. The presence of large numbers of Chinese students, and the thirst of universities for foreign funding, has also provided a mechanism for the Chinese regime to exert its malignant influence in Australia, both directly via Confucius Institutes and other platforms for propaganda and academic intimidation, and via intimidation and surveillance of Chinese students in Australia — especially those tempted to take advantage of university traditions like free speech and protest.

It’s not just universities that have made a Faustian bargain — far greater than any other higher education sector around the world — in pursuing revenue from foreign students. Business and governments have also benefited as education became our third highest “export”. There’s no managing this array of problems: the only solution is a reduction in foreign student numbers and ending our universities’ addiction to the revenue generated by them.