Slashing foreign student numbers would be economic self-harm

03 July 2024

This opinion article by Business Council Chief Executive Bran Black was published in The Australian Financial Review on 3 July 2024

Amid proposals to cut the number of students coming to Australia, calm heads must prevail so we don’t cannibalise one of our long-term national advantages for short-term benefit.

Yes, we have housing supply challenges. Yes, there are shoddy “education” providers.

But as we tackle these challenges – and I don’t dismiss their significance – we must avoid self-harm. After all, we are playing with Australia’s fourth-largest export at a time when our economy is on a knife’s edge.

We face an uncomfortable truth: without migration in recent years, we would be in a real-terms recession.

International students accounted for almost a quarter of all GDP growth over the year to March 2024. The sector was worth $48 billion in 2023 and employed over 200,000 people.

That’s money that flows into all areas of our economy – to businesses, government, and the quality of education for Australian students.

It’s 48 billion reasons to think twice before we cut too hard.

As we manage migration growth, there are two key considerations which we must bring into the equation for the international students sector.

First, we must protect one of our nation’s economic powerhouses and a source of regional soft power. Whatever we do now must be calibrated to ensure we remain a world leader in higher education for the long term.

That means acknowledging the critical value of international students in supporting university research, which in turn is critical to driving our international competitiveness in new industries like quantum computing.

Our major research universities pay for around 70 per cent of their research with course fees. It follows that if our research quality drops because we earn significantly less revenue from international students, we will struggle to hold our position as a major education exporter, and that means jobs will be cut.

Second, we must weigh any immediate pressures that have been attributed to migration and international students against pressure on our national budget. Migrants, and particularly students, add more into the economy than they take out. So, if we propose to limit students, we should have a very clear picture of the projected economic downside first.

We also need to consider that the pendulum has already swung away from growth. In light of actions the government has already taken, our student visa approvals have already dropped 36 per cent (or 49,000 approvals) from this time last year.

Student numbers are at around 786,000 – close to pre-pandemic levels of around 756,000 in 2019. Of these, 76 per cent will return home after their studies.

This week Home Affairs doubled the cost of student visas to make them the highest in the world – we are yet to see the impact of this action.

In this context, do we dare or need to squeeze any further? I think the long-term economic risk significantly outweighs the short-term political and social benefit.

The government is in the process of implementing its migration strategy. What we still need is a long-term holistic lens to it that is aligned with housing and infrastructure needs, and our capability to deliver them.

We need to address migration in a targeted and rational way that gets to the root of the actual problems, instead of harming our well-managed and well-regulated international education institutions.

We should manage growth in high-quality students and institutions and take action to cut non-genuine students, especially through some of the poorer-quality, and in many instances disingenuous, offerings in the VET market. This would shrink the sector without damaging our economy.

Regarding our housing shortage, the primary focus of our efforts should be creating more dwellings. International students are the red herring of the housing debate, masking the real discussion on how we approve and build more homes, particularly in addressing state and territory planning bottlenecks.

The Business Council’s position is that we must focus our energy on tearing down the barriers to housing supply at a state and territory level. To do this, the federal government should create a national reform fund that makes payments to states and territories as they improve productivity. For housing, this would mean potential incentives being paid to states and territories that have sped up planning processes that currently hold development back.

These are some of the rational approaches we can take. Our economy is finely balanced – so before we start slashing student numbers, we should consider how much GDP we are really prepared to sacrifice.


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