Article:

Border closures' impact on Australia’s higher education sector is not only a revenue problem

06 May 2021

Leah Russell , Partner, Audit & Assurance |

Higher Education has been significantly impacted by COVID-19 through border closures with international students unable to return, or attend, for the first time. Enrolments are significantly down and will continue to decrease until borders reopen - with the current scenario meaning it’s unlikely we will see an easing of the conditions created by the global Pandemic in the next year.

The overall impact is not only on university revenues, it also affects the economy in three ways. Firstly, shrinking numbers have a flow-on effect on the general business community, such as accommodation providers and retailers. Secondly, it impacts our Knowledge Economy which affects future job skills and growth. Lastly, it will impact university-led research which fosters innovation and is vital for the growth of Australia’s economic future. Therefore, in the upcoming Federal Budget, we hope to see announcements in support of the higher education sector.

Benefits to the business community

Over the past decade, Australia has benefited from the significant growth of international students within Higher Education. Only months before COVID-19 hit, the minister for Education, Dan Tehan, reported that international education contributed $37.6 billion to the Australian economy, a $5 billion increase in the previous year. This was a rising trend, with five years of consecutive growth in the double digits over the same period and ultimately benefiting the entire business community.

The ripple effect of falling revenues

In 2019, over 400,000 international students were contributing over $8 billion of revenue, or 26% direct to university revenue. However, since COVID-19, and with universities falling outside the scope of JobKeeper, many have reported deficits, are cutting programs, and fear the loss of research funding. Universities have been in damage control while looking at ways they can reengage international students. 

This has become not only a university revenue problem; it also ultimately jeopardises Australia’s Knowledge Economy and future research.

A Knowledge Economy relies on data and intensive knowledge and spearheads innovation - it also makes up part of Australia’s strategic plan for our future economy. Cutting programs will affect these much-needed future skills and job growth, which is also linked to innovation and research.

The loss of university revenue due to a lack of international students directly impacts the ability to fund research in the future. Currently, our universities facilitate a large portion of Australia’s research. For example, the higher education sector contributed 34% of R&D funding in 2017-18.

Through research, we see innovations and productivity increases for Australia. Businesses also rely on universities for research by collaborating with them to help solve their problems and thus, improving their profitability. Therefore, by far, the most detrimental impact to Australia’s higher education sector – and economy - will be the loss of research funding.

Funding for higher education in the Federal Budget

Without a doubt, Australia sets to be negatively impacted by ongoing border closures without Federal Government intervention. With these factors in mind, there are several options for growth on the table, however, a mix of these is required to ensure all areas of growth for the economy are supported.

On May 11, when Treasurer Josh Frydenberg hands down the Federal Budget, the top three areas needed to allow funding for the higher education sector is:

  1. Funding of quarantine for international students, or the federal government allowing the sector to facilitate quarantining under the Government's guidance
  2. An increased provision for grants or incentives on top of last year’s Federal Budget, to continue and/or expand research and development
  3. Provide grants to students suffering hardship that will enable current students to stay in Australia studying – this will also provide confidence to students thinking of studying in Australia that they will be supported.

 BDO’s team of sector experts will be analysing the Federal Budget as it happens - you can find more information on our dedicated Federal Budget page. Make sure you subscribe so you don’t miss the latest insights and register for our Federal Budget review webinar to hear our experts’ opinions.