Just as households and businesses tightened their belts last year, so too did Australian universities.
Jobs were cut, expenditure was scaled back to basic levels, capital works were put on hold and planned research activity for which funding had already been allocated was postponed.
As a result, some Group of Eight universities have reported operating surpluses for last year.
However, any suggestion these universities have secured a windfall gain as a result of the COVID-19 pandemic or have cried wolf are simply not accurate.
The financial challenge facing Australian universities is real, and the increasingly competitive international education environment may have a long-lasting impact on our capacity to support Australia’s post-pandemic economic recovery.
Universities and governments must work collaboratively if Australia is to maintain its global reputation for offering first-class education, the nation’s fourth-largest export and a significant contributor to our ongoing economic growth.
A 2018 analysis by London Economics calculated that international students at Go8 universities added $18bn to the Australian economy. That doesn’t include the value of highly skilled international graduates who remain in Australia or the soft-diplomacy value of most Go8 graduates who return to the region.
That many Go8 universities are in a financial position that is better than forecast is a tribute to the management and commitment of staff members, many of whom took pay cuts or had salary increases deferred.
Because of strong financial management, some universities are in the position where they can reverse pay cuts because they took the hard decisions early on.
There was no JobKeeper for staff at Australian universities, so tough decisions had to be made and they were.
A similar outcome in the private sector would be lauded for demonstrating sound leadership yet seems to attract derision in our university sector.
Another factor was our universities’ capacity to move rapidly to online learning to deliver world-class teaching, which allowed for a better-than-expected retention of international students in semester two last year as many stuck by Go8 universities and continued their studies offshore.
With continued uncertainty over the rollout of COVID-19 vaccination and international border closures, there is no guarantee this good fortune will be sustained in coming years.
In fact, recent data from the Department of Home Affairs shows that applications for a higher education visa have fallen by 36 per cent in the first two months of this year compared with last year.
It also must be noted that an operating surplus is not profit. In the case of higher education, it includes revenue from philanthropy, investment earnings and research grants that are tied to specific projects and cannot be spent on day-to-day operations.
The underlying or real surplus more accurately portrays the financial position of an institution. In 2019, pre-COVID, the real surplus across Go8 universities was a slim 2 per cent of operating revenue. Last year it is estimated the real surplus could drop to under 1 per cent of operating revenue.
Not all Go8 universities have recorded operating surpluses. Last week the Australian National University announced an operating deficit of $164m. Although an improvement on its previous forecast, this was largely due to better-than-expected tuition income from student retention and income from research grants.
There is one constant for all Go8 universities, however. They will all be deeply affected by the challenge ahead to retain and attract new international students as competition from leading universities in Canada, Britain and Europe intensifies.
This was reinforced recently by former federal education minister Christopher Pyne, who acknowledged that the sector was facing a significant financial shake-up.
Competitor nations are aggressively marketing their open-border policies, offering incentives to international students and targeting Australia’s lucrative international education trade, which was worth about $40bn to the economy in 2019.
We cannot assume that the 30,000-plus international students who stood by us last year will continue to do so in coming years. International students are still going to Canada, Britain and Europe, where COVID-19 is not a barrier to entry.
The Go8 has supported the federal government’s decision to open our borders to international students only when it is safe to do so. Nothing has changed.
However, decision-makers must recognise the economic realities facing Australia’s higher education sector, particularly during the next few years and particularly for our research-intensive universities. It is unlikely last year’s results will be repeatable this year and beyond, given the progress of the pandemic and the competition the sector is facing from international counterparts.