Capping International Student Numbers: A Complex Issue

The Australian federal government’s decision to cap international student numbers appears to be politically motivated, with immigration expected by many political analysts a key issue in the next election. International Education added $48b to the Australian economy in 2023 and the impact of these changes are complex and hard to unravel. International experience shows that we should be careful of unintended consequences. 

For education providers already heavily invested in international students the cap on international students could drastically affect their reputation, revenue streams and potentially their financial stability. This is especially so for the Group of Eight universities, English language providers, and private vocational education institutions who rely on full fee-paying international students. And it is not just about the tuition. Universities particularly have evolved into substantial businesses with complex investments deep into the international student value chain. Every international student in Victoria is estimated to spend $44,000 in our economy outside of their tuition. That money helps subsidise our university research and flows into our broader economy. Our reputation as a premium, stable, and safe place to study has taken time to build and we have already tarnished it with our COVID responses. It is hard to predict what a rapid unwinding of this will do to the sector. 

It is important to remember that international students also play a critical role in the Australian labour market. They often fill jobs that domestic workers are less inclined to take, including food delivery and private transport services like Uber. During COVID, the absence of international students highlighted their significant contribution. A cap could create labour shortages in sectors heavily reliant on this workforce. 

Some argue that the policy changes will force the redistribution of international students into regional institutions who currently have significantly fewer international students. However, these institutions do not typically have the same brand to attract, nor are they set-up for these students. For example, the volume of practical placements is not available for teachers, nurses, and allied health professionals.  The infrastructure to support these students is inadequate, and there are fewer casual jobs for them to support themselves.  

Domestic politics, aka housing affordability, is likely the big driver of these changes, but the impact on our housing market is also complex. International students often occupy types of housing that do not appeal to many Australians, such as shared apartments and student accommodation. It is hard to find reliable evidence of the real impact of this problem. Most of the main-stream media argues about the high number of international student enrolments (800k in YTD May 2024), when this is a stock-and-flow problem, and we are in the middle of the COVID rebound combined with a housing crisis. Student accommodation also attracts significant international capital investment. Reducing the number of international students could alleviate some housing pressures but might also lead to an oversupply of certain types of rental properties and inadvertently affect overall market stability and investment. 

The decision to cap international student numbers is described as a “blunt instrument,” suggesting it is an oversimplified solution to a multifaceted problem. While countries like Canada are exploring similar policies, they are doing so on a trial basis, indicating a more cautious approach. As Andrew Norton outlined in The Conversation recently, the Government has already introduced a series of changes intended to dampen the influx of international students and the impact of these have yet to flow through the system.  

The debate around this issue is highly emotive, with strong arguments on both sides. With the Senate Committee report due this week, the hope is that cool-heads prevail and that we can navigate a path with few unintended consequences.