As the government persists in its mission to ‘bring down net migration,’ it’s crucial to highlight the potential economic downturn. There’s a looming realisation that we may be undermining a significant export industry, with all the associated repercussions, which should be a cause for concern.
The Koala often focuses on the social benefits education brings to communities, campuses and individuals; however, it acknowledges the undeniable economic discussion surrounding international education. This discussion, unfortunately, holds more sway in policy decisions than the former.
International education is not just a significant export for Australia, it’s the 4th largest, as Alan Olsen explains here (TKN 11/1/24). It’s a sector that sits behind Coal, Iron Ore and Natural Gas, and is even more valuable than Gold. As Alan aptly puts it,’ George Megalogenis in 2012 depicted Australia as a quarry with a view, a minerals-rich continent with a physical environment attractive to international tourists. Perhaps Australia in 2024 is a quarry with a campus.’
As Olsen explains,’ After the value of Education as an export for Australia nearly halved, from $37.555 billion in 2018/19 to $20.776 billion in 2021/22, the value bounced back to $36.4 billion in 2022/23, up 75% from a year earlier, and just 3% lower than the pre-pandemic peak in 2018/19.
International education not only contributes significantly to Australia’s economy, but it also diversifies its base. It diversifies its base in an extraordinary way.
Not only does international education carry its own set of economic deliverables, but it intertwines with tourism in a significant way. Family visits, graduations, and students visiting different places during their breaks all add value to the domestic tourism sector.
Olsen goes on, In those same years, the value of Tourism as an export for Australia fell more sharply, from $22.451 billion in 2018/19 to $0.363 billion in 2020/21, then rose to $14.350 billion in 2022/23.” He says.
Students, their families and friends’ contributions require attention as the negative outcomes of “reducing net migration” have yet to reach the national discourse.
Even as far back as 2009, Dr Stephen Kennedy, now Secretary to the Australian Treasury but at the time General Manager, presented a paper, “Australia’s Response to the Global Financial Crisis”, which can be seen on the treasury website here. In this, he made the following point:
Immigration has been and continues to be an important driver of Australian growth. Just over 25 per cent of Australians, or one in four, were born overseas. Over the past 10 years, net migration has accounted for around half of the increase in the labour force.
Robust growth in immigration, especially with its focus on skilled migration, helped Australia adjust to a rapid increase in demand for its mineral resources from 2003 to 2008, which drove commodity prices to record highs.
While income growth in Australia was strong before the global financial crisis hit because of the surge in commodity prices and associated mining boom, it was also clear in this period that Australia was running up against capacity constraints.
The labour market was tight, despite the strong growth in immigration, with the unemployment rate hitting a 33-year low of 3.9 per cent in February 2008.
Perhaps the clearest signs that the economy had run up against capacity constraints were the steady deterioration in Australia’s productivity performance and the rise in inflationary pressures.
Sound familiar? It is these capacity restraints that The Koala is now starting to hear grumblings about. It may not be at the top end of town, but where is the casual workforce coming from if the International Student sector is being slashed?
A few days ago, on March 8, The Koala was pleased to see the AFR run a piece titled “Foreign Students are Saving the Economy.” Michael Read, the author, clearly gets it, and the Koala would recommend reading this from Go to Wo.
In it, he points out that “Spending by international students accounted for more than half of Australia’s economic growth in 2023, according to new research warning that a sharp increase in visa refusal rates will be a headwind to growth this year.”
“NAB senior economists Brody Viney and Taylor Nugent said about 40 per cent of spending by international students was tuition fees, while the remaining 60 per cent was on the consumption of goods and services in Australia.” A point that is so important and often overlooked.
Students, while here, contribute to the economy as Australian nations and residents do. They catch buses, trains, they go out for dinner and they play cricket at the local cricket club. Their consumption patterns mirror Australian households. What’s more, the money they use to do it is proportionally split between that earned in Australia working part-time and funds that have been brought from overseas. A supercharged gain for the balance of trade.
“But international students will add far less to GDP in 2024, as visa approval rates fall back to pre-COVID-19 levels. NAB expects education exports will contribute a modest 0.25 percentage points to GDP growth in 2024, which is forecast to run at a below-trend annual rate of just 1.7 per cent.” Say Brody and Viney.
So, well and good that the government is “bringing down net migration,” but at what cost into the future? And who will suffer? Clearly, international students not only contribute positively to communities, campuses, and individuals but also to our economy, and we will all be worse off down the road due to current policy.
