Overseas students — what is happening and why it matters to our economy

Governments need to plan for the long term economic impact of the coronavirus pandemic on the International Education industry, writes Abul Rizvi.

OVERSEAS STUDENTS have in recent years represented over 40% of net overseas migration — second only to a natural increase in terms of contribution to population growth. They are crucial to the funding of Australian universities and other educational institutions, to the many businesses that operate around university precincts and to the Australians that these businesses and universities employ.

International Education is the largest source of export income for Sydney and Melbourne and one of the biggest generators of jobs in these two cities.

In the last 20 years, students have been crucial to reducing the rate at which Australia was projected to age. With a median age of 37, students have made us one of the youngest developed nations on the planet. Together with our comparatively higher but falling fertility rate, overseas students are key to the rate at which Australia’s population ages in the future.

COVID-19 raises doubts about our reliance on international students

The Australian Government must reassess its international student intake, both for the good of the nation and the students themselves, writes William Bourke.

So what is the latest on overseas students given COVID-19 and the weakening economy?

For the quarter ending June 2020, 130 overseas students arrived in Australia while 22,820 overseas students left for a net outcome of negative 22,690. That negative trend is likely to continue for the remainder of 2020, particularly as students complete their courses towards the end of the current academic year. That may drive a negative net overseas migration outcome in 2020-21 rather than the revised forecast of 31,000.

To address decline in the International Education industry, the Government has announced a plan to allow overseas students entry to Australia from January 2021 subject to quarantine and other requirements. That would also rely on whatever changes are made to the current cap of 4,000 overseas arrivals per week and the extent to which students are accommodated within that cap.

At end June 2020, there were 555,310 people on student visas in Australia — down over 7,000 on the number at end March 2020. That does not include people already in Australia who have applied onshore for a student visa but that visa application has not yet been decided. They would be amongst the record 333,516 people in Australia at end June 2020 on bridging visas (see Chart 1).

*(Source: Data.gov, Temporary Entrants in Australia)*

Why the Department of Home Affairs (DHA) is not seeking to clear the growing backlog of bridging visas may become clearer once it releases details of the 2019-20 Migration Program outcome. Is it just a question of resources being diverted to other priorities (eg $30 million on detaining the Biloela family or $90 million on the now-abandoned visa privatisation initiative or who knows what amount on detaining refugees brought to Australia from Manus and Nauru as well as those still there), or are there other policy constraints?

At end June 2020, there were 100,239 people in Australia on a temporary graduate visa, an increase of over 3,000 on the situation at end March 2020. The Government has been making changes to this visa to encourage greater take up but narrowing opportunities for these people to access permanent residence — that is not a sustainable policy.

Both students and temporary graduates do not have access to Commonwealth-provided social support (such as JobSeeker or JobKeeper) and must maintain private health insurance — while they pay tax, they do not have access to Medicare. If they must self-isolate due to COVID-19, they have little financial support for this (no pandemic leave).

University staff pressuring government in a fight for their jobs

As we recover from the coronavirus crisis, Australian university staff are being asked to take a pay cut as the sector is facing huge losses.

In the current high unemployment environment, a substantial number of students and temporary graduates are relying on charity or support from state governments or from universities.

Against this background, it is hardly surprising that offshore student visa applications declined significantly from 289,691 in 2018-19 to 192,723 in 2019-20 — the lowest level since 2012-13 which was the first year after the Knight Review recommendations were implemented. Offshore student visa applications in the June quarter of 2020 fell to 9,968 compared to 79,786 in the June quarter of 2019 (an 87% decline).

At the same time, onshore student visa applications continued to increase in 2019-20 (see Chart 2).

Most students in Australia at the time COVID-19 started have not gone home as suggested by the Prime Minister. They appear to want to complete their courses and undertake other courses to maximise their chances of securing permanent residence. This includes subsequently taking advantage of post-study work visas that are available even if the labour market is weak.

The challenge for these students will be severe difficulties in securing relevant skilled work experience on a temporary visa required to meet most permanent skilled migration visa criteria. It reflects the serious policy mistake of tightening student visa policy a number of years after tightening pathways to permanent residence — thus putting the cart before the horse.

The other crucial question is to what degree the decline in offshore student visa applications was due to COVID-19 and to what degree offshore applications were already in decline due to student visa changes, tightening of pathways to permanent residence (other than for some regional visas) and a weaker economy prior to the pandemic. This will be relevant to the post-COVID-19 situation for Australia’s International Education industry.

Chart 3 shows that offshore student applications were already in decline prior to the pandemic, but that its impact has understandably been severe. This will not recover quickly after COVID-19 if student visa policy remains tight, pathways to permanent residence remain tight and the labour market is weak — all of which are highly likely.

In terms of major source countries, Chart 4 highlights that student visa applications from China, India and Nepal were already in decline prior to COVID-19.

While the decline from China in the June quarter of 2020 was a very significant fall of 60% compared to June 2019, it was much less than the fall for the other three major source countries. In the June quarter of 2020, offshore student applications from China represented over 60% of total offshore applications. Prior to COVID-19, offshore student applications from China were only 21% of total offshore student applications.

This suggests students from China may be less reliant on income from local employment and may also be less interested in permanent migration.

By contrast, offshore student applications from India and Nepal had been falling sharply well before COVID-19 — the likely impact of tighter student visa policy, tighter pathways to permanent migration and a weaker labour market.

In the June quarter, offshore student visa applications from India fell to 10.7% of total offshore student applications from 18.6% in the previous quarter. Offshore student applications from Nepal fell to 1.8% in the June quarter of 2020 compared to 7.6% in the March quarter of 2020 and 11.3% in the March quarter of 2019.

Student applications from Brazil fell to just 64 or 0.6% in the June quarter of 2020 compared to 2,112 or 3.6% in the March quarter of 2020.

In terms of industry sectors, offshore student visa applications have always been dominated by the higher education sector. That was even more the case in the June quarter of 2020 where over 65% of offshore applications were for higher education.

The V.E.T. sector, in particular the private V.E.T. sector, tends to access a larger portion of its students from higher education student already in Australia. That relativity was maintained in the June quarter of 2020 with 22,302 onshore student visa applications being for the V.E.T. sector compared to 22,546 onshore student visa applications for the V.E.T. sector in the June quarter of 2019.

Proposed university changes undercut value of education

Large-scale changes for Australian universities, ostensibly an emergency move for COVID-19, look like politics and marketing — not a considered plan for Australia’s future.

The higher education sector had 9,405 onshore applications in the June quarter of 2020, only slightly less than the 10,902 onshore applications in the June quarter of 2019.

There has also been a shift in the balance of onshore student applications to different states.

The standout performer has been South Australia, most likely due to a recommitment by the Commonwealth to assisting population growth in South Australia through targeted visa changes. On a per capita basis, South Australia punches above its weight in terms of onshore student applications (see Chart 5).

In the March quarter of 2020, South Australia received 8.2% of onshore student applications, well above the just above 5% for most quarters only two years ago.

Increased reliance on onshore students is, of course, unsustainable.

If the June 2020 quarter performance in terms of offshore student applications is replicated in the September and December quarters, the current pain the International Education industry is experiencing will be magnified.

But it would be foolish to assume offshore student visa applications will return to the heyday of 2018-19, even after the pandemic.

Australia’s International Education industry needs to start planning to be substantially smaller in the long term. That also applies to ancillary industries that rely on overseas students, particular in and around university precincts.

The resulting lower levels of net overseas migration also mean Australia’s population will age faster and the point at which natural increase becomes natural decrease (deaths exceeding births) will come forward.

Both Commonwealth and State Government need to start planning for the long-term economic and budget impact of that.

Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration, currently undertaking a PhD on Australia’s immigration policies. You can follow Abul on Twitter @RizviAbul.