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Losing the competition for overseas students

29 July 2021

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“Make no mistake: Australia’s response to the pandemic is a competition.  It’s a competition for international investment, skilled migrants, tourists and students … And we’re losing.  Badly.”

I was struck by this comment made by a Professor of Economics in a recent article in The Conversation.  He made it in the context of another global competition that Australia is currently proudly and actively competing in all fields.  I wish he was wrong.  But he is not.


This article laments what is happening to international education.  Australia is not even in the competition.  It’s borders remain closed to overseas students.  Any expectation that Australia can re-join the frontrunners once this pandemic is over is false hope.  This pandemic is not going to magically be over any day soon.  Australia needs to get back in the race now for the Government to remain true to its dual priorities of saving livelihoods as well as lives.



Are we really faring so badly?


If we compare the number of overseas students enrolled in Australian programs last year with the same for recent years, the situation does not look too bad at all.  Compared to 2019, enrolments fell over 2020 by a mere seven percent, and they are still up on what they were a year prior.

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Source:  Department of Education, Skills and Employment (DESE) (2021) International student data.

Much of the fall was attributable to falling numbers from China, which is leading to a lot of tut-tutting about the foolishness of relying too heavily upon this market.  And it is causing many to share their views on how Australia would be faring much better had it a more diversified overseas student mix. 


Before we get too caught up with the delusionary wisdoms of hindsight, it is important to take ‘stock’ of what we are looking at.  The chart above is the total number – the stock – of overseas students enrolled.  It is the sum of students who enrolled for the first time in each year shown plus all those who enrolled in the years prior and are continuing with their studies.


What is of greater interest is what is happening to the flows.  That is, what is happening to new commencements, as changes to the number of students starting out on their courses of study today will impact enrolments not just in the current year but for years to come.


The seemingly innocuous seven percent decline in enrolments is largely explained by an alarming 22 percent drop in overseas student commencements over 2020.  In the first quarter 2020 much of the loss was due to Chinese students not commencing their studies.  This is hardly surprising as Australia closed its borders initially to only China in February 2020, following the arrival in Melbourne of a man from Wuhan with COVID.  As COVID spread, border restrictions quickly became more comprehensive.  But not quick enough to significantly impact commencements in the first semester 2020.  The big hit came in semester two, which saw commencements plummet by more than a third in the last two quarters of 2020. 

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Source:  DESE (2021) International student data.


So, to get back to my question: are we really faring so badly?  Clearly, we are.  The drop in overseas commencements has continued unabated in 2021 as the borders remain shut.  With no certainty regarding when they might open, there is not much hope for commencements resurging anytime soon.


Before we move on, take a look at the colour of the bars in the chart above for the first quarter 2021 compared to the same quarter the year prior.  Chinese student commencements have been relatively stable.  All other markets have not.  Other Asian countries are down by around a third.  The Americas and European countries have more than halved.  In other words, the claim by many that Australia would not have fared so badly had it a more diversified student mix is not supported by the data.  Particularly when, pre-COVID, over a fifth of globally mobile tertiary students originated from China and India, and more than a half were from Asia (refer chart below).  Diversification is, of course, a good thing.  But it should be towards new markets rather than away from old ones that have served Australia well.



Aren’t other countries also running a slower race?


Good question.  Initially yes.  But not anymore. 


Pre-COVID, over half of all (Asian and other) globally mobile tertiary students were preferencing seven study destinations.  The United States was the clear front runner, the United Kingdom came in at second place, followed by Australia as a close third.  The other culturally and linguistically similar destination, taking seventh place, was Canada.


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Source:  UNESCO Institute for Statistics, Inbound internationally mobile students, National Monitoring database.

In other words, the United States, the United Kingdom and Canada are Australia’s competitors for globally mobile students, largely from Asia and, to a lesser extent, from elsewhere.


As COVID struck, just like us, our competitors cooled their heels.  Unlike us, they are back in the race.  What is happening to student visas granted in competitor countries provides insights into how each is faring.  The charts below compare the ups and downs of student visas issued by the big four competitors.  Focus your attention on the movements relative to the same quarters a year prior.  Do not get too caught up with the numbers on the y-axes due to differences in what gets measured.


For the purpose of facilitating comparison, let me start at home: Australia, in the top left hand corner of the charts shared below (or just the top, if you are viewing this from your phone or tablet).  The quarterly comparisons provide further evidence of what we have just discussed: a sustained pattern of overseas student decline.  Border closures are a big part of the reason why.  Although an initial suspension of the processing of student visa applications from applicants outside of Australia, and delay to processing others, didn’t help.

The impact of the closures was different depending on where students were located.  For students stranded offshore, their post study work entitlements were put at risk.  For students stranded in Australia, they were made to feel unwelcome as they were advised that it’s time to go home, and as Chinese-looking students endured racist reactions to the pandemic.  For those where returning home was not an option, often struggling to get by as they had been laid off from their jobs in hospitality and other impacted sectors, the Commonwealth Government provided no support as measures were reserved for citizens only.


Corrective steps were taken.  Student visa processing recommenced.  Online study is now allowed to count towards post study work rights.  And State and local governments and education institutions have stepped into the void, providing an incoherent patchwork of relief for students in their jurisdictions.  But the reputational damage has been done. 


And, if the latest Budget assumptions are anything to go by, Australia’s borders are not opening up anytime soon.  They are likely to remain closed until mid-2022.  Attempts to reopen to students on a state-by-state basis are faltering at the start line, due to either circumstance or policy shifts.  Take, for example, New South Wales (NSW).  Just last month, the State Treasurer revealed its plan to bring back 250 overseas students to Sydney every two weeks from the middle of the year.  His announcement followed hot on the heels of South Australia’s more modest plan to return students.  Note that in both cases we are talking only about the return of students and nothing about allowing new overseas students into the country.  Nonetheless, the plans of both, and those of any other State or Territory looking to follow suit, have been thrown into disarray by the four phased Plan to Transition Australia’s National COVID Response released early this month.  The current phase provides for “trials for limited entry of student and economic visa holders”.  In other words, the numbers allowed back will be limited, despite proposed steps to ensure the COVID-safe arrival of students, such as chartered flights, stand alone quarantine facilities and vaccine requirements.  Add to this the recent halving of international visitor arrivals now allowed.  This will have effectively killed off any remnant political appetite to return students, as so many Australians are stranded offshore.  For NSW, all of this has now become largely academic as by the middle of this month the State Premier confirmed that she is hitting the pause on plans to return students until the virus is under control. 

Put yourselves in the shoes of overseas students of NSW institutions stranded offshore.  In the space of just two months, following many more of not knowing when or if they can return, these students were given hope that they could, only to have their hopes dashed again, with no timeline for knowing when or if returning will be a future possibility.  Not a great experience.  Now put yourselves in the shoes of globally mobile prospective students weighing up whether to study in Australia or elsewhere.  The NSW Treasurer was right when he recognised at the time of announcing their plans that “If we don’t act fast, students will turn to other overseas destinations and it could take the sector decades to recover.” 


If you are not convinced that it is time for Australia to re-join the race, let me move on to consider what the competition is up to.

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Sources and Notes:  

Australia:  Department of Home Affairs, Student visas granted pivot table.  Counts primary and secondary applicants for student visas.
United States:  Bureau of Consular Affairs, Monthly Nonimmigrant Visa Issuance Statistics.  Counts visas issued academic (F) and vocational (M) study and for the spouses and children of visa-holders.
United Kingdom:  Home Office, Outcomes of applications for entry clearance visas – dataset.  Counts sponsored study and other study visa outcomes for main applicants and dependents.
Canada: Immigration, Refugees and Citizenship Canada, Temporary Residents: Study Permit Holders – Monthly IRCC Updates.  Counts new and renewed study permits issued each year.


In the top right hand corner (or second) is the United States, traditionally the frontrunner in the competition for overseas students.  Travel restrictions introduced under the Trump administration saw student visas issued not just fall but fall hard – witness quarter two 2020.  This is all about to change.  Effective from next month, the Biden administration has announced the lifting of travel restrictions for students from China, Iran, Brazil, South Africa, Schengen Area, the United Kingdom, and Ireland.  In addition, stricter student visa laws proposed under Trump have not been approved.  And, just this week, a joint statement was released by the Department of State and the Department of Education – A Renewed US Commitment to International Education.  The US Secretary of State referred to international education as a “foreign policy imperative”.  “It’s strongly in our national interest for the US to remain the top destination for international students,” he said.  In stark contrast to Australia’s approach, the statement is positioned as an important part of the United States recovery from COVID: to build back better by re-engaging the world to make it stronger at home.  The 360 degree policy backflip paves the way for the tens of thousands of current and future overseas students hoping to commence studying in the United States.  The early announcements have already led to a resurgence in student visas issued – witness quarter two 2021.  The United States has re-joined the race with ferocity. 


In the bottom left hand corner (or third) is the United Kingdom.  While its borders never explicitly closed, travel restrictions applied early in the pandemic saw the outcomes for study visa applications virtually disappear in the second quarter 2020, with numbers significantly depressed in the following quarter.  Since then, study visas issued have recovered strongly and have remained at higher volumes when compared to the same periods a year prior.  The British Home Office explains that this is likely a result of applications and grants being displaced from the previous quarters.  That is, at worse, it is a one-off correction.  At best, the United Kingdom has improved its position in the competition for overseas students.  Particularly given its relative freedoms, high vaccination rates, the extension of vaccines to students, overseas student support, and enhanced-focus on the student experience under its International Education Strategy.


In the bottom right hand corner (fourth) is Canada.  Canada’s low domestic birth rate has resulted in a focus and dependency on overseas student enrolments for both institutional and economic survival.  Canada was one of the first countries to reopen its borders in October 2020 and has been issuing study permits ever since.  Arriving students are required to quarantine for 14 days before returning to their universities, which must have an approved COVID-19 plan.  For students and graduates already in the country, emergency financial support was made available to all impacted by COVID, whether they were living in Canada on a permanent or temporary basis.  In the first quarter 2021 the number of study permits issued surpassed the number issued pre-pandemic.


The inconvenient truth is that Australia does not have the luxury of cooling its heels while it focuses on its COVID-response because its competitors will be doing the same.  They were.  But one-by-one they have re-entered the race and are competing harder than before. 



Who cares?


The commentaries of some would have you believe that this is the just deserves of education providers who have focused too heavily on overseas students in order to fatten their bank balances.  By extension the suggestion is that they have been participating in the wrong race: they should have been competing and improving their offerings for domestic students.


These arguments irk me on so many levels.  For starters it pitches domestic and overseas students as an ‘either … or …’ when the truth is that subsidised vocational and higher education places for domestic students are both quantity and price constrained.  Looking at the numbers for higher education, pre-COVID overseas student fees were a vital revenue source, climbing from $4 billion to $10 billion over less than a decade, and accounting for more than a quarter of all revenue sources.  These funds were available for improving the education experiences of all.  True, too much got syphoned off to fund research and not education.  But that is a whole other article and misses the point.

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Source: DESE, Finance Publications and Tables.

Further, it is not the bank balances of Group of Eight (Go8) universities, responsible for teaching many of the students who harken from overseas, who are faring the worst.  The Go8 have done well in retaining and attracting students willing to study online offshore in order to benefit from the prestige of obtaining qualifications from these highly ranked providers.  It is the vast majority of lesser ranked providers who are doing it tough. 


More significantly, the $10 billion in tuition fees equates to only a quarter of export earnings from overseas students in 2019.  This is because fees are not the only cost to overseas students when studying and living in Australia.  It is not even the largest cost.  They have living expenses to meet, including food, accommodation, entertainment and travel costs.  In other words, overseas student spending supports the viability of many Australian businesses, not just education providers.  As the former Minister of Education touted at the time, international education “is our largest service-based export and supports 240,000 jobs, business opportunities and economic growth.”  It also took fourth place overall when ranked against all exports.

Border closures have had a dual impact on Australia’s education exports, both of which are apparent in the chart below.  The first is that earnings turned a sharp corner from a peak of $41 billion by the end of 2019, to $34 billion in the year ending March 2021.  That is, a large 18 percent fall over just 15 months, thereby supporting fewer jobs and contributing less to growth.

The other impact evident in this chart is the growth of what the data has categorised as ‘correspondence courses’: tuition fees for Australian courses of study taken by correspondence by overseas students.  In other words, online learning.  Historically these earnings have been so small that they were largely invisible to the eye when charted.  Since COVID, correspondence courses have gone from strength to strength.  By the year ended March 2021, they contributed a significant $4 billion, and softened the fall of all education exports.  If we excluded correspondence courses from the mix the fall would have been much sharper.

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Source:  Australia Bureau of Statistics (2021) International Trade in Goods and Services, Australia, Table 11a, category number 5368.0.

Thus, in one sense, the ability to move courses previously delivered on campus to online has been a partial saviour for the sector when it’s overseas students are either stranded offshore or are onshore but in lockdown.  In another sense, when learning online is the only option, it is not a sustainable solution.  As we have just discovered, commencements are falling and the allure of studying on campus in competitor countries is great.  This is not the same as saying that online, hybrid and blended courses should not constitute part of Australia’s future suite of international education offerings that students can elect from.  They should.  But the key word here is ‘elect’.


Importantly, every student who is studying online offshore when they would much rather be on campus onshore is one less student living and spending in Australia.  Which, as just discussed, is the greater source of earnings, jobs and growth.  From the point when the data first became available in July 2020, it is apparent that the number of overseas students enrolled outside Australia has grown substantially - from over 66,000 in July 2020 to over 120,000 in March 2021.  Put another way, that is 54,000 additional overseas students, and most likely more given the late start to counting, who are not living and spending in Australia.

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Source:  DESE (2021) International students outside Australia due to COVID 19, Research Snapshot, May.

Beyond the immediate financial and economic benefits, there are longer term benefits of creating COVID-safe pathways for the entry of overseas students.  For those who want to and are able to stay on, overseas graduates make great migrants.  By definition they are well educated and they have had time to immerse themselves in and learn Australian norms and values.  In addition, they possess the cultural and linguistic skills and networks necessary to take best advantage of growth opportunities in the region.  Yet current policy settings require students who study here to conspire in the myth that they have no aspiration of staying.  Many do.  Or did. 


Compare this to the approaches of our competitors.  An important part of the United Kingdom’s, Canada’s and now also the United States strategies to attract the best and the brightest students to their shores is to ease their pathways to residency.  The United Kingdom has re-introduced post study work rights, which allow holders to stay on to work, or look for work, for two years.  In Canada, graduates holding post study work permits have been invited to apply for open work permits to overcome any difficulties in seeking permanent residency.  The changes were made explicitly for the purpose of “encourage[ing] international students to settle permanently in Canada, as they help create jobs and fill labour shortages so our businesses can thrive.”  And now in the United States there is a proposal to make the route to residency easier for overseas students of advanced STEM degrees. 


In the United Kingdom, analysis of the migrant journey finds that former overseas students accounted for nearly a fifth of settlement cases in 2020.  In Canada, a study by Statistics Canada found that almost one-third of overseas students who earn bachelor degrees in in the country went on to become permanent residents in the ten years after they get their first study permit, and half of those with masters degrees.  By way of contrast, analysis by CEDA finds that in Australia, almost 84 percent of former student visa-holders leave the country after 20 years.  Only 16 percent move on to a permanent visa. 


The net effect is that Australia is doing itself a double disservice.  It is failing to compete to attract overseas students, and it is missing out on the opportunity to retain global talent.


That said, having overseas students who do study onshore and then eventually go home or to another country is not without its own merits.  They become a powerful source of soft diplomacy.  The trick is not to constrain their choices from the outset.


Pivoting back to my question: who cares?  While every now and then Australia’s policymakers make the right noises and say they do, their actions would suggest otherwise.  Failure to compete in the race for overseas students by supporting and encouraging their safe return is having, and will continue for some time to have, a large and detrimental impact on Australia’s economic fortunes.

Mary Clarke


DXP Consulting

M: +61 401 088 571


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