Australia's $21 billion a year education export boom now driving a two-speed economy

Jonathan Chew

Updated Apr 28, 2017 – 9.15pm, first published at 9.15am

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Following the end of the mining boom, most governments are looking to the services economy to pick up the slack. International education in particular is being heralded as the country's next mining boom.

The Commonwealth government is looking to double the number of onshore enrolments – that is those coming to Australia to study rather than in overseas campuses or online – by 2025, and most states have strategies in place to lift their market share.

Just looking at the headline figures would suggest that we are on to a good thing with education exports hitting a new high of $21 billion in 2016-17. Onshore commencements have rebounded strongly to surpass the previous peak in 2010.

Highly ranked universities are doing well internationally. Other universities are not. Louie Douvis

However, deeper analysis shows that international education has become the driver of a new two-speed economy with a distinct reversal of fortunes. Where the mining boom delivered windfall investment and revenues for Queensland and Western Australia, the international education boom is flowing primarily to Victoria and New South Wales, and Melbourne and Sydney in particular.

It is undeniably true that the international education and training sector is doing well. Commencements in 2016 across all states and sectors are higher than they were in 2010. However, there are firstly sectoral differences – higher education and English language courses are the clear winners, with VET and school sector commencements growing to a lesser extent.

The institutional detail (available for 2015) shows that in fact the vast majority of the growth in higher education has been driven by postgraduate enrolments. Undergraduate enrolments have far from recovered.

Haves and have nots

A small number of highly ranked universities, namely the University of Melbourne, Monash University, and the University of Sydney are driving this postgraduate growth trend. Other Group of Eight universities such as the University of Queensland, UNSW and ANU are also doing relatively well in the postgraduate market.

Postgraduate enrolments at these six universities alone account for more than 60 per cent of the net increase for the higher education sector from 2010-2015. Many other universities are still a fair way behind the previous peak in international education enrolments achieved in 2010.

As the key source countries of China, India, Korea and others in Southeast Asia continue to invest heavily in developing their domestic institutions, the quality and accessibility of undergraduate degrees is improving. An Australian bachelor degree is perhaps becoming less of a distinct advantage in the local labour market, and therefore a less convincing return on investment proposition.

In terms of the Commonwealth government's yet to be settled future funding arrangements, there are important implications for funding models that are reliant on teaching surpluses from international students to fund research activities. Will those universities that have a harder time competing for research funding also now struggle to maintain or grow their international student enrolments in postgraduate courses?

For the Australian universities themselves, there are of course strategic issues that need to underpin their approach to international markets, particularly around the positioning of their course portfolio.

Are these shifts in consumer preferences temporary or tied to short-term regulatory requirements? Or is there in fact a permanent shift away from undergraduate onshore delivery? Does this create the impetus for the next generation of international branch campuses or other offshore delivery models?

These are of course part and parcel of a new boom, and therefore good problems to have.

Jonathan Chew is a director at the Nous Group.