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Australia's universities are over-reliant on overseas students

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Sydney University (pictured) is among the many tertiary institutions that has increased its very heavy reliance on overseas students (Image via Wikimedia Commons)

Australian universities are heavily dependent on overseas students for their survival, leaving them vulnerable to political and economic change in Asia, in particular, and disadvantaging domestic students, writes John Menadue.

In 1984 the number of international students in Australian was minimal and the Australian University Vice Chancellors were very sceptical about encouraging international students to study in Australia. They feared the displacement of Australian students.

But in the Department of Trade we pressed on and now there are almost 700,000 international students in Australia. International education is now our third largest export earner — over $30 billion per annum and rapidly rising, year on year. But there are problems.

The benefits from our export of educational services have been spread across Australia. It is estimated that each international student spends over $40,000 per annum in fees and living expenses. Chinese, Indian and Nepalese students represent over 50% of overseas students. The growth has been extraordinary and is likely to continue.

This spectacular increase in education exports is far beyond anything that we imagined in the Department of Trade, in 1984, when we first considered the promotion of international students. As a percentage of total exports they hardly then appeared on the graph.

Education exports are now third after iron ore and coal. Export services are tipped to make us very soon the second most popular world destination for overseas students after the U.S. The UK is slipping back, as will probably the U.S. as a result of the Trump factor.

With our export of education services in its infancy in 1984, we examined in the Department the reasons for our poor performance in exports generally and how we could respond. We continued to rely on resources booms every decade or so. The inflated dollar had put our manufacturing sector under great pressure. Between 1965 and 1982, we had not created one new job in manufacturing. Our economy, as well as our society, was insular and inward-looking.

While we had a large services sector in Australia, particularly in education and health, it was overwhelmingly focused on the domestic market. Our exports of services were very low in world terms. Yet we had world-class education institutions and the middle class of Asia was growing. We were not taking advantage of that opportunity and we compared very unfavourably with educational institutions in the U.S. and UK — who were performing much better than we were in expanding their role in our region.

In the Department of Trade, we could see clearly that we were missing out and we focused our attention on how we could lift our exports from our well-reputed institutions and, particularly, our universities. The mindset in our education sector was then overwhelmingly domestic.

In addition to seeing the possible economic benefits of expanded education exports, I also saw increased numbers of Asian students as a way to improve Australians attitudes to Asia. As a student at a university college in Adelaide, I had roomed with students from Malaysia. They changed my attitudes on White Australia and relations with our region. My experience with these and other students who came to Australia under the Colombo Plan was I believe an important factor in helping to transform community attitudes about Asia and  White Australia.

Until those Asian students came to Australia there was a fairly widespread view of Asians as poor and unskilled and a threat to our living standards. But the Asian students studying here in the 1950s and 1960s were young, well educated, spoke good English and not at all threatening.

So I saw Asian students at our universities and schools as offering both economic and social benefits.

But to get the ball rolling we first had to convince Australian universities about the possibilities of substantially increased Asian students on their campuses. In my autobiography in 1999, Things you learn along the way, I wrote about my first approach to Australian vice-chancellors.

In the department in 1984, we commenced a study on the export of educational services. After we had completed the study, I spoke at a dinner with 19 vice-chancellors of the major Australian universities in the Scarth Room at the ANU about our thinking and plans for the export of educational services. I outlined ways in which I thought we could promote education services offshore and encourage more Asian students to come to Australia. The Americans and British had been doing it very successfully. We were not serious competitors. With the universities under financial pressure, this was a commercial opportunity for them. It would also transform university campuses and, hopefully, student attitudes towards Asia.


The dinner at the ANU turned out to be a frost. The vice-chancellors were not impressed with my commercialism. My main critic was Professor Peter Karmel, Vice-Chancellor of the ANU. He had been my mentor from Adelaide University days. We held similar views on most public issues but we didn’t agree on this one. He was upset at commercially exploiting educational services on such a scale. After the dinner, Karmel buttonholed me on my proposal. His concerns also came back to me through an old friend, Frank Hambly, Secretary of the Vice-Chancellors’ Committee: ‘What is Menadue up to in advocating selling overseas educational services in this way?’, he had asked his colleagues.

You always remember the speeches that don’t go well but in retrospect, it helped quicken reform. In the mid-1980s education exports were minimal. They will be over $30 billion this year!

The remarkable growth in education services has not been trouble-free. With cutbacks in government funding – mainly for our universities – institutions have become too dependent on fee-paying overseas students.

The evidence on this is very worrying. Auditors-general in the states have drawn attention to this heavy dependence, particularly on Chinese and Indian students. The NSW Auditor-General has told us that two universities in NSW secured over 73% of their overseas revenue from China alone. The Queensland Auditor-General reported that the University of Queensland receives more of its revenue from international students than domestic students. In Victoria, 39% of full-time fee income comes from international students. Both UNSW and Sydney University have increased their very heavy reliance on Chinese students.

It is unfortunate that the number of overseas students from close neighbours, Indonesia and Malaysia, is so small.

In some cases, I think academic standards have been compromised. Students might be forgiven for thinking that if they pay $30-40,000 per annum for a course that they are entitled to a pass!

Universities also do not seem to effectively encourage social mixing of international and Australian students.

We need also to face the prospect that as educational institutions in our region develop, fewer students will come to Australia.

With universities desperate for overseas students, many students have also seen a student visa as a back door entry for permanent residence. With international students able to work part-time, many have been exploited by dodgy employers.

But in 1984, when I spoke to the 19 vice-chancellors, I could not have envisaged the dramatic changes that were to come. The seed I sowed with the vice-chancellors fell on stony ground, but it survived and flourished.

Now we need to urgently review the downsides of our heavy dependence on overseas students.

John Menadue was Secretary Department of Trade 1984-86.

John Menadue was Secretary Department of Trade 1984-86 and is a commentator, businessman and former diplomat. You can follow John on Twitter @johnmenadue. This article was originally published on John Menadue's blog 'Pearls and Irritations' under the title, 'From little things, big things grow, but problems can arise'.

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