This article is more than 2 years old

This article is more than 2 years old

Australian universities have a “market concentration risk” because of their increasing reliance on overseas students, the New South Wales auditor general has warned.



University revenue from fees paid by overseas students increased by 23% across NSW in 2017, the report shows. The overseas cohort now brings in $2.8bn for universities in NSW, and accounts for 28% of total revenue.

Sydney University academics denounce western civilisation degree Read more

And with only a handful of countries making up the bulk of fee-paying students – China provided 54% last year, followed by India and Nepal – the auditor general warned that universities must weigh up their reliance on the overseas student market.

“NSW universities should assess their student market concentration risk where they rely heavily on students from a single country of origin,” the report found.

“This increases their sensitivity to economic or political changes in that country.”

The increased dependence on foreign fee-paying students is particularly stark because of the relatively limited pool of countries from which the majority of overseas students come.

Data published in the auditor’s report reveals that 37% of NSW universities’ total student revenue came from overseas students from just four countries. At one university, as much as 71% of overseas student revenue comes from a single country.

While the auditor limited its scope to NSW, Department of Finance data shows that it’s not alone in its reliance on foreign students. In 2016 fee-paying overseas students contributed $6.2bn to university revenue nationally. Victoria had the largest share – raking in $2.1bn of the total.

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The higher education program director for the Grattan Institute thinktank, Andrew Norton, said universities were taking a “calculated risk” on overseas students.

“Every university is aware that international student revenue is not guaranteed, and that the biggest risk is the China market due its scale and [the] danger of Chinese or Australian government decisions causing the number of students to fall,” he said.

“I believe they have taken a calculated risk. They know that the China boom probably won’t last forever, but that they might as well take the money while they can.”

The controversy this week over the Australian National University’s decision to pull out of negotiations with the John Howard-backed Ramsay Centre over the establishment of a degree in western civilisation is in some ways a proxy for a larger issue.

The Ramsay Centre is offering universities a share of a $3.3bn bequest at a time when government revenue is shrinking.

Sydney University academics denounce western civilisation degree Read more

The NSW auditor found that government funding as a proportion of total revenue decreased by 6.4% over the last five years, and the federal government’s plan to freeze commonwealth grants funding at 2017 levels would “put pressure on the universities to expand other sources of revenue and contain their costs”.

“Universities are expanding other revenue streams to decrease their reliance on grant funding,” the auditor stated. “The revenue stream that has increased the most significantly over the past five years is overseas student revenue.”

Adrian Piccoli, the former NSW education minister and now head of the Gonski education research centre at the University of NSW, said universities were “making a business decision”.

“You can’t blame universities for that,” he said. “I actually don’t think the growth in international students would be any different even if there was additional commonwealth funding because it’s still additional revenue.

“They wouldn’t be sitting back, they’d still be pursuing it. It’s a source of revenue, it’s in the national interest and it’s good for the general economy.”

But it will pose difficulties for smaller and regional universities. The auditor’s report showed that while overseas student funding was increasing dramatically, the leverage was not equally shared.

Two universities in the state – the University of Sydney and the University of New South Wales – accounted for more than 50% of total revenue from overseas students.

Similarly in Victoria, the University of Melbourne, Monash and RMIT make up the bulk of overseas student revenue.

But regional institutions such as the University of New England and the University of Newcastle – the only two in NSW that still draw more than 45% of their revenue from government grants – will be squeezed harder by the the freeze on commonwealth grants.

“They’re in a difficult position because if you can’t control revenue, you have to control costs,” Norton said. “It may mean cutbacks in some of those institutions in research or capital building.”