Universities Australia (UA) has warned that recent commentary suggesting Australia’s university sector is in strong financial health overlooks deep and growing structural pressures facing institutions.
In a statement responding to media reporting, UA said surface-level financial indicators, including aggregate operating surpluses, mask a decade of funding erosion, rising costs and policy instability that continue to strain universities across the country.
The warning comes as universities prepare for further real-term funding cuts in 2026, compounding challenges already facing the sector.
“Australia’s universities are critical national assets – educating millions of Australians, driving research and innovation, and supporting economic growth,” UA Chief Executive Officer Luke Sheehy said.
“But the financial foundations of the system have weakened, and without targeted action, those pressures will only get worse.”
While universities collectively recorded a 4.7 per cent operating surplus in 2024, UA said this should not be interpreted as a sign of financial strength. The result was largely driven by temporary and non-recurring factors, including unusually strong investment returns and delayed inflation indexation following the 2022 CPI spike.
Behind the headline figures, UA noted that 13 universities remained in deficit in 2024, down from 26 in 2022 and 25 in 2023. At the same time, 22 universities reported weak liquidity, with current liabilities exceeding current assets, while sector-wide expenses rose by $3.5 billion in a single year, including $2 billion in salaries and on-costs.
UA said teaching and research funding remain under sustained pressure. Real funding per Commonwealth-supported student has fallen by around six per cent since 2017, despite continued growth in student numbers, leaving universities receiving less funding per student than in 2017, the last year all places were fully funded.
Research funding also remains structurally misaligned, with universities contributing $1.06 of their own funds for every $1 of research income received. Government investment in research and development has fallen to less than two per cent of total expenditure, while Australia’s overall R&D effort sits at a 20-year low of 1.7 per cent of GDP.
International education, long relied upon to offset funding shortfalls, is no longer a guaranteed buffer. International student fee revenue only returned to its 2019 real value in 2024, and growth is expected to slow due to tighter visa settings, higher costs and enrolment caps. International students now account for just over one-quarter of university revenue, leaving institutions increasingly exposed to policy and market volatility.
UA also highlighted declining investment in campus infrastructure. Capital expenditure across the sector fell from around $4.5 billion in 2019 to approximately $3.86 billion in 2024 and remains below pre-pandemic levels. Capital spending now accounts for less than 10 per cent of total university expenditure, with seven universities spending less than five per cent of revenue on capital investment.
Since the abolition of the Education Investment Fund, UA said universities have received little direct government support for capital works and have been forced to rely on operating surpluses to maintain and upgrade facilities.
In its 2026–27 pre-budget submission, UA has outlined a package of reforms aimed at stabilising the sector, including fixing Job-ready Graduates, restoring real per-student funding, supporting sustainable international education growth, rebuilding campus infrastructure and lifting public investment in research and development.
“A strong and sustainable university system underpins Australia’s productivity, skills pipeline and research capacity,” Mr Sheehy said.
“We need a stable footing to ensure universities can continue to deliver for the nation.”
UA has called on the federal government to use the 2026–27 Budget to properly fund universities to ensure they can continue to support students, research, innovation and economic growth.
The statement from Universities Australia can be seen here.
