International student collapse to drive university consolidation

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Margaret Simons wrote an interesting article in the Saturday Paper explaining how the ending of the “reckless” boom in international students means that Australia’s empire building universities will have to shrink:

It was Australian tertiary institutions that first sent recruiting agencies to China and India and began tapping the market…

Changes to migration policy – allowing graduates to stay in the country and work for two years after completing their degrees – meant students from poorer countries could access the Australian labour market, and gain the chance of permanent migration.

The result is either a virtuous circle, or a vicious one, depending on your point of view. In the wake of the borders closing, it looks more vicious…

But the government will not bail out the big universities for the risks they took with the international student market.

Even within the sector, there are those who describe some of the big increases in international students in recent years as “reckless”…

So the universities hurtled on, with the proportions of international students increasing ever more rapidly. “Of course, everyone was worried about it,” says one former vice-chancellor. “We talked about it all the time. But what choice did we have?”…

Almost certainly, with a global economic downturn inevitable, the boom is behind us. Our universities are about to shrink…

But, as Croucher points out, the message from the government is clear: universities, having taken the risks and the benefits of the international student market, will have to take some of the pain of the decline.

Australia’s universities made out like bandits from the long boom in international students, raking in a whopping $44 billion of fees in the five years to 2019:

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This boom was never sustainable nor desirable and has contributed to an erosion of entry and teaching standards at universities, as well as unhealthy ties with the Chinese Communist Party (e.g. via Confucius Institutes).

Now the boom in international students is over, our universities must learn the concept of ‘moral hazard’.

They privatised the gains from the explosion of international student numbers. Now they must wear the costs of the downturn.

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Leith van Onselen
Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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