Don’t kill the golden goose: Australia and the growing international student market

The coming decade is likely to see step change expansion in Asian student mobility throughout the world. But if Australia is to capture its share of the growth, it will need to improve the student experience it offers, and avoid diminishing the reputation for university quality on which its success depends.

This year, Australia will reach a new record in its international student numbers, and five years of pessimism about its future while the AUD climbed ever higher seem to have evaporated. Now the nation’s third largest export, international education brings in $17.6 billion p.a., and is expanding by $1 billion a year, adding some 5,000 additional jobs a year to the 120,000 it has already generated.

Truly, our university sector has become the goose that lays the golden eggs.

And there could be more eggs on the way. A Deloitte study Positioning for Prosperity identifies international education as one of four Australian sectors that will grow at least 10% faster than GDP over the next 15 years. It predicts that by 2030 half of the world’s entire middle class will be in China, India and Asia: and that would mean nearly 1 billion more Asian families affluent enough to send their children to study at universities abroad.

To be sure, Asian governments are keen to develop their own universities to stem the flow of bright students and their course fees abroad. Especially in China, the number and quality of local universities is rising rapidly. But this expansion is not likely to catch the demand for university education, which is growing at a staggering rate. At the top end in China, PKU (Peking University) now receives more than 200 times the number of applications it can admit, and no amount of growth in the array of alternatives seems likely to ease this extraordinary pressure. India has demand developing almost as fast; clearly, there will be an expanding market for international students for a very long time to come.

The challenge for Australia will be maintaining its share as the market expands. Not long ago, Australia (with the UK) was an undisputed leader in the Asian student market, offering education that was of high quality, relatively inexpensive, and close by. But now many US universities have sought to replace their own declining government support with income from international students, and an increasing number of American universities now compete with us for students in key Asian cities. They too offer high quality, often at a lower price than we can. Moreover, Australian universities have become massive, offering ever larger classes and less personal experiences, while many American campuses can still boast a small-class, personalised experience. The threat to our market position is thus significant.

What must be done to ensure Australia continues to share in the coming expansion? Firstly, we will need to improve the experience that we offer international students here in our universities. With the high cost of living and fees in Australia, the sometimes mixed educational outcomes, and the often sub-optimal accommodation, travel and support arrangements, we are exposed to being overtaken by more attractive alternatives. As the Commonwealth’s new National Strategy for Higher Education points out, we need to take a stronger role in ensuring for students we recruit adequate language proficiency, affordable and appropriate accommodation options, better interactions with Australian families, and more opportunities for relevant work placements.

To take the accommodation options for instance, we have left too much to the private sector, with some uneven, and at times exploitative outcomes. Some developers produce student complexes which charge inflated rents for tiny living quarters, while some landlords offering modest rents crowd students into regular apartments in numbers well beyond their legal capacity.

Clearly the student accommodation sector is ripe for the entry of more responsible, sophisticated operators, who will take a more integrated, community approach to creating student living, and can do so at an affordable price. The entry of the UK-based Scape Student Living to Melbourne and Brisbane promises to be a game-changer: Scape typically includes teaching rooms and business incubator spaces in their student developments, as well as gyms, cafes and communal areas, and well-appointed apartments.

Governments can help. In South Australia, the State Government has recognised the sector as one of its ten economic priorities, setting growth targets for international student numbers and a plan to establish for them a State-wide accommodation guarantee. With State encouragement, a number of student accommodation developers are in discussion with local universities about increasing Adelaide’s student housing capacity in affordable and imaginative ways. In its 2015 budget, the State has provided $5.7 million for an array of measures to stimulate the sector, notably by increasing destination marketing through Education Adelaide and through international scholarships.

But there is a more critical factor to ensuring our future as a student destination than improving the student experience. University reputation remains the leading criterion for Asian students deciding where to study. They take the international ranking tables very seriously, and in the past Australia has benefitted from having an unusually well-ranked university sector. But with declining government funding and both major political parties having proposed more cuts, the challenge of sustaining the world-class research, staff and infrastructure on which this reputation depends may soon become extreme.

Clearly, our Senate must soon resolve a way to adequately fund our universities into the future, and unpicking the current Government’s higher education reform package is not likely to achieve that outcome. The 20% cuts to CSP grants proposed in the Budget, if passed without the Government’s associated proposal to deregulate fees, would be a disaster for the university sector, destroying its capacity to collect sufficient income to operate competitively. Our Senators all seem to understand that higher education has become a major revenue generator for the economy, and are keen to see that flourish. But like the greedy farmer in Aesop’s fable, who in his impatience for more golden eggs ends up tearing open the goose that lays them, our Senate’s dissection of university reform may end up tearing apart the universities on which one of our leading export industries depend.

Published today in The Australian

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