The ecstasy of the Australian Universities Accord has waned rapidly due to several government policy controversies. These are likely to impact considerably on the ability of universities to undertake its core mission: to educate those who seek it and deliver benefits to the state, civil society and the communities in which universities serve and operate.
Consider the impact of the international student cap on Australian universities. In its’ first year of implementation, it is likely to cost universities between $650 million to $750 million in foregone tuition fees.
In turn, it may mean thousands of jobs could disappear, eroding universities’ research endeavors and provision of support services to students, and impacting building maintenance and infrastructure projects.
To say that the cap on international student enrolments will not impact universities and the wider society is a fallacy. The glory of reputation has been a key lever to bolster universities’ finances, and the reputational damage has been done. It will be felt next year when global rankings come out.
Deficits galore
Prior to the pandemic, universities that reported net operating deficits were few.
Recently, I retrieved the annual reports from all universities for 2023 and checked financial statements. Out of 41 universities, 27 reported a deficit. This is the second consecutive year when a record number of institutions reported a deficit. In 2022, 27 universities also reported a deficit.
One may argue that these deficits have occurred by design, to maintain existing staffing levels and finance universities’ operations, with the view that we were returning to pre-pandemic levels regarding international students.
Several Australian universities are likely to continue to report underlying operating deficits over the next few years.
A weaker economy
This year, one of the major concerns that has been raised by many of us is how we can best equip our university leaders and governors to make informed decisions about the direction and path to follow moving forward. This is particularly due to the externalities and strong headwinds that have hindered the sector’s growth.
We grew up accustomed to economic stability, with the added societal benefits derived from it, and uncertainty is unsettling. In the six decades between 1960 and 2019, Australia only had 14 quarters of negative economic growth. For 28 consecutive years Australia’s economy grew quarter after quarter.
The pandemic changed it all. In 2020, we experienced two consecutive quarters of negative growth and another one in the September 2021 quarter. For the past eleven quarters the Australian economy has grown, although at a weaker rate since the ‘recession we had to have’ back in 1991.
What lies ahead?
As we have already seen, there are fewer domestic students enrolling at university. Back in May, I noted that the domestic commencing student cohort was expected to rise moderately to 2030, and the latest statistics published by the Australian Department of Education reaffirm this view.
University students are taking longer to complete their award studies. In turn, it means that universities must improve their ability to provide student support and give them the agency and recognition they deserve. The provision of enhanced support must be targeted – particularly those from disadvantaged backgrounds and specific disciplines.
Australia’s unemployment rate is also on the rise. We can expect universities to report fewer graduates in employment once the 2024 Graduate Outcomes Survey results are released in coming months.
The much-discussed need to diversify student recruitment markets is a long-term solution, as it takes years to enter into new markets. Australia is geographically situated in the region which has become the epicentre of global education activity. The continued reliance on key markets from the countries in Asia will remain.
Countries which were previously importers of educational services are now exporters, so there is lots of competition to attract international students.
Furthermore, national governments are shifting away from globalization and embracing more nativist or regional approaches. A university’s ability to increase international revenue is therefore limited.
And finally, let us not forget that reduced revenue from international students means fewer resources dedicated to research endeavors. We are seeing a decrease in the number of scholarly outputs being produced by researchers from Australian universities compared to pattern seen in past years. Fortunately, our researchers’ work continues to be cited, being recognised as top quality, influential, and impactful. We might run out of steam if we let our guards down.
The lost decade?
All these things point towards Australian universities facing uncertainty over the next few years. In February, I observed that the outlook for higher education for Australians was bleak.
Currently, it feels like the financial recovery for universities is years away, and as a result this may be Australia’s lost decade for higher education.
Our universities’ governance frameworks were constructed under the period of economic stability. Policymakers, regulators, universities’ leadership and governance will be tested through this period of uncertainty.
The decision will need to be made if we want our universities to continue to be pivotal institutions to the functioning of society.
