Go8 submission to the Draft International Education and Skills Strategic Framework

June 14, 2024

Draft International Education and Skills Strategic Framework consultation
Department of Education

Introduction and recommendations

In responding to the Draft International Education and Skills Strategic Framework (the Draft Framework) the Group of Eight (Go8) states up front that it is absolutely committed to adopting a more sophisticated approach to international education that backs in integrity and quality and takes a nuanced approach to managed growth in the system.

However, the approach adopted in the Draft Framework runs the risk of a string of unintended yet foreseeable consequences that could have a disastrous effect on both Australian society and our economy.

It is important to note that the central drivers of the Draft Framework are provisions for the Minister for Education to cap the number of students at provider and course level for all universities, including a link to the supply of additional student accommodation. Despite running the current consultation process, the Government has already effectively endorsed the Draft Framework and has moved to the legislative implementation phase through the introduction of the Education Services for Overseas Students Amendment (Quality and Integrity) Bill 2024 (ESOS Amendment Bill).

The Go8 believes that the introduction of these measures will fundamentally compromise Australia’s international education sector and constitutes what is effectively a breach of good faith in the consultation on the Draft Framework.

It is critical to bear in mind what is at stake: i.e., the viability of a $48 billion export industry – Australia’s largest export services industry – that underpins essentially all university sector operations and in 2023 contributed half of Australia’s economic growth.

The Go8 will provide a separate and fulsome submission to the Senate Education and Employment Legislation Committee inquiry into the ESOS Amendment Bill. That submission will provide detailed feedback on the failings of that legislation while this current submission should, in the main, be considered a high-level rebuttal of the principles under which that Bill operates.  

Given this, the Go8 consents to this submission to be published and has no wish for any of it to be treated as confidential.

The Go8 supports the Minister’s stated aspiration to remove the ‘shonks and crooks’ and ‘dodgy providers’ from the system. Indeed, the Go8 has endorsed several measures undertaken by the Government – and noted in the Draft Framework – such as increasing the accountability of education agents, cutting down on “poaching” of international students between providers, capping working hours for international students and introducing a Genuine Student requirement for student visas.

However, the Draft Framework will undermine the very part of the international education sector that demonstrably operates with quality and integrity – our public institutions.

The central “command-and-control” approach to international education in the Draft Framework and ESOS Amendment Bill represents an unjustifiable risk to the nation. There is no evidence the approach will work – and significant evidence that it will fail. It is not practically implementable by the proposed 2025 start date. It will cause significant financial damage to the sector and the Australian economy. It is founded on a false conflation of international students and Australia’s housing crisis.  And it will leave a long-term legacy of political interference in a $48 billion export industry.

In essence, the Draft Framework represents a dramatic overreaction to what is a short-term bubble of pent-up international student demand following Australian border restrictions during the COVID-19 pandemic.

We are already seeing that the Draft Framework and ESOS Amendments Bill is having an impact on the global reputation of Australia’s international education industry. Ratings agency S&P have very recently published a report Australian Universities: Would International Student Caps Spur A Course Correction? outlining that the politically motivated policy to cap international student numbers, in response to a post-COVID increase in temporary migration, threatens to unravel a thriving industry and curtail critical institutional autonomy.[1]

The Go8 strongly encourages the Government to adopt a more negotiated and evidence-based approach to managing Australia’s international education sector. Accordingly, the Go8 makes the following high-level recommendations.

Discussion

As noted, the Go8 is fully supportive of increased integrity and quality in Australia’s higher education industry and the need for strategically managed growth in the sector.

The Go8 also endorses many of the aspirations expressed in the Draft Framework including increasing diversity in source countries of international students and in the courses they study, more consistent levels of integrity and quality across the entirety of the system, increased diversity in location and type of international education offerings including transnational and online delivery, a focus on the best interests of the student, and alignment with Australia’s current and future skills needs. While these are important and recurring touchstones for international education, they are also a standard component of previous Government approaches to international education such as the Australian Strategy for International Education 2021 – 2030.

Given the central and immediate focus of the Draft Framework is to provide the Minister the power to implement caps on international student enrolments, this discussion will focus on the Draft Framework as relevant to the matter of caps and the proposed ESOS amendments.

Lack of evidence for success of a cap-based approach to managing international education

In the discussion of Objective 2: A Managed System to Deliver Sustainable Growth Over Time the Draft Framework says:

Within a plan for managing the system:

• Public and private higher education provider enrolment levels will be determined by the Minister for Education. (Page 16)

Considerations in determining these enrolment levels will include addressing Australia’s skills needs and that transitional arrangements will need to provide particular support to regional delivery and regional universities.

While these are worthwhile ambitions, a centralised approach that tells students where and what to study does not work. Job Ready Graduates (JRG) attempted to do exactly this with domestic cohorts. Changes to maximum Student Contribution Amounts (SCA) attempted to dictate to students what they should study, and geographic specific Commonwealth Grant Scheme (CGS) loadings attempted to direct the where. It is now clear that both approaches failed.

The Government opposed the introduction of the JRG package when in opposition and through advice from the sector and the Universities Accord report has been repeatedly advised that the JRG initiatives are causing damage. Nevertheless, reform of the JRG is not scheduled to commence until the Australian Tertiary Education Commission (ATEC) commences operation on 1 January 2026 – five years to the day after the JRG was implemented. This shows the difficulty in unpicking bad policy frameworks once implemented.

Attempting to implement a similar command and control regime for international education will be even more damaging and harder to remediate than the JRG.

International students are extremely sensitive to where and what they study. QS 2024 World University rankings indicate that over half (54) of the top 100 ranked universities in the world can be found across Australia, Canada, New Zealand, the US and the UK, with nine from Australia. While this is an outstanding result that demonstrates the quality of our higher education sector, it also demonstrates the choice of quality institutions that is available to international students.

And they do not just target a particular country. Many international students are specifically interested in particular locations within that country. As the Go8 Chair, Professor Mark Scott, has said:[2]

There has already been a range of courses on offer outside our cities, often at lower prices but, overwhelmingly, international students want to come to big international universities, with the strongest global reputations.

To suggest they can be directed elsewhere is like telling international tourists they can’t see the Opera House and Sydney Harbour, the Australian Open and the F1 – they will only be allowed into Australia if they don’t go to Sydney or Melbourne.

This is consistent with the latest QILT International Student Experience Survey results. In 2022 the top reasons for international students choosing to study at their Australian providers were: the institution offering the course the student wanted to study (96 per cent); the reputation of the qualification (95.6 per cent); employment opportunities after graduation (94.8 per cent); the reputation of the institution (94.2 per cent); and the course fee (90.5 per cent). 

The Go8 supports the Draft Framework in stating it is important to consider aligning international student enrolments with Australian skills needs. However, the 84 per cent of international students who do not pursue a long-term migration outcome in Australia following graduation are basing their degree and course selections not on Australian skills needs, but on their judgement of the skills that will benefit them in their home country. This is part of the service that the Australian international education sector provides as our leading services export industry. If this majority cohort of students are denied the free choice to study the courses they want within Australia, they are likely to take up the many options offered elsewhere in the world.

If enrolment caps for international students are introduced, a 2025 implementation schedule is unworkable

While the Go8 is opposed to caps on enrolments by international students, given the urgency of these matters it is important to comment on the implementation time frames presented in the ESOS Amendment Bill with new arrangements commencing from 1 January 2025.

In practice, our members must begin their recruitment processes well in advance of the academic year. It is estimated that across the Go8 over 4,000 unconditional offers and over 50,000 full and conditional offers to international students for 2025 have already been made. Approximately three-quarters of full offers and acceptances are registered by the end of November.

If the ESOS Amendment Bill becomes legislation, then there is the potential that providers may not know their caps until 31 December 2024. While this may not be the intention of the Government, this would be the legislative reality that universities would be required to plan for as a matter of due diligence.

To indicate the scale of the challenge, currently across the Go8 members there are over 4,000 individual courses on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). Under the provisions of the ESOS Amendment Bill the Minister for Education may institute a cap for commencing international students or all international students for each course. Breaking any of these over 8,000 potential caps by a single student could bring sanctions under the Bill.

Significant financial damage to the Australian economy and Australia’s higher education sector

Recent analyses of the performance of the Australian economy have evidenced the key contribution of the international education industry.

In particular, a National Australia Bank (NAB) analysis shows that spending by international students was responsible for an 0.8 percentage point increase in GDP in 2023, over half of the recorded economic growth for that year.[3]

Additionally, in the National Accounts released for the March 2024 quarter by the Australian Bureau of Statistics (ABS) partly attributes low GDP growth for the quarter of 0.1% to a fall in exports of services of 1.1% “in line with below average arrival of international students in the March quarter”.[4]

As the growth of the Australian economy slows, the risk posed by the implementation of caps on international student enrolment is one that should not be countenanced.

International education revenues also underpin the operation of Australia’s higher education sector. For Go8 members – who are not for profit organisations in which all revenue is invested in teaching and research activities, in 2022 (latest available complete figures) – almost 33 per cent of revenue was sourced from fee paying overseas students.

University financial data published by the Department of Education from the same year indicate that despite the contribution of international student revenue 26 of 38 universities (Table A providers only) reported a negative operating result and the sector a collective loss of $1.2 billion.[5]

This same trend continued in 2023 with annual reports available to date indicating that two-thirds of universities have reported a net operating loss.

Enrolment caps impacting international student revenues will further and significantly weaken the financial position of many Australian universities.

In practical terms, international student revenue is essential to cross-subsidise much of the operations that allow Go8 members to be globally leading research-intensive universities that undertake $7.7 billion in R&D annually and provide a world’s “top 100” education experience to over 265,000 Australians.

In particular, international student revenue is used in the following contexts:

• Government research grants through the Australian Research Council (ARC), National Health and Medical Research Council (NHMRC), and Medical Research Future Fund (MRFF) typically support less than half the full economic cost of undertaking the research. International student fees are currently needed to make up the shortfall. The research – including world-leading medical research – supported by international student fees across all disciplines is of immense value to the Australian community.
• In the absence of dedicated Commonwealth funding for capital projects, universities are heavily reliant on discretionary income from international students to fund major teaching and research infrastructure projects.
• Under Job Ready Graduates (JRG) changes funding for universities to deliver key courses in engineering and science were reduced by 16 per cent. Many of these courses – key to the future economy and national undertakings such as AUKUS – now require cross-subsidisation from international student revenue in order to be delivered.
• Any activity that does not include explicit government funding – such as comprehensive student and staff support resources and an ever-increasing regulatory and reporting burden – are subsidised using income from international students.

Finally, an economic analysis undertaken for the Go8 by leading European specialist policy and economics consultancy London Economics has estimated that in 2020 alone, international students commencing at Go8 institutions had an aggregate economic impact of $17.40 billion and supported a total of 73,925 jobs throughout the Australian economy.

It is important to note that increasing international student fees to compensate for the potential loss of institutional income from the introduction of caps will not be a viable strategy. A detailed Go8 analysis shows that international students are sensitive to price, and this will be a significant factor in their decision of whether to study in Australia.[6]

In appendices to this submission the Go8 has provided preliminary and indicative scenarios of the impact on Australia’s research efforts of a cap on international student enrolment that leads to a cut in revenues.

The Go8 expects to have more detailed and sophisticated impact modeling in the near future.

The conflation of international students and Australia’s housing crisis

The Draft Framework suggests that for universities alone, a range of considerations will influence the Minister’s setting of their international student enrolment caps, including each institution’s supply of purpose-built student accommodation. It further suggests that the Government may only allow universities to enrol additional international students above their caps, where they have established additional, newly built supply of purpose-built student accommodation. (p.16)

This is seemingly in response to the public and political discourse which has claimed that migration and in particular international students as temporary migrants are significant contributors to Australia’s housing crisis.

Attached is a detailed Go8 policy briefing International students and housing and other cost of living pressures that provides an economic analysis debunking these claims.

In particular, the analysis notes that the housing affordability and more general cost-of-living crisis is fundamentally a supply side problem, rather than attributable to international student arrivals.

The S&P report Australian Universities: Would International Student Caps Spur A Course Correction? confirms that the measure contained in the Draft Framework linking caps to the provision of student accommodation is not a silver bullet for the housing crisis and states:

We think it’s unlikely that universities can meaningfully boost supply of student accommodation. The domestic construction industry is overstretched, and onerous local council planning rules are a major impediment.

While the Go8 is currently undertaking an audit of the supply of student accommodation across the Go8 members, preliminary data suggests that the Go8 provides or facilitates access to at least 83,000 beds of student accommodation indicating that Go8 members currently have significant “skin in the game”.

If part of the intention of Government in implementing caps for international student enrolments is to redistribute international students away of metropolitan centres, then it should be noted that Department of Education data indicates that in 2022 approximately 52 per cent international students enrolled at a regional university were actually studying at a campus location in a capital city.

[1] https://www.spglobal.com/ratings/en/research/articles/240612-australian-universities-would-international-student-caps-spur-a-course-correction-13139717

[2] Let’s wait before we make rash decisions on foreign students, Australian Financial Review, June 5, 2024.

[3] https://www.nab.com.au/content/dam/nab-email-composer/nabmarketsresearch/economics/pdf/2024-03-07%20thematic%20-%20Students.pdf

[4] Australian National Accounts: National, Income, Expenditure and Product, released by the Australian Bureau of Statistics on 5 June 2024: https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release

[5] https://www.education.gov.au/higher-education-publications/finance-publication

[6] Go8 Policy brief: A damaging international student tax https://go8.edu.au/policy-brief-a-damaging-international-student-tax